December CPI Data: India's Retail Inflation Modestly Eases To Four-Month Low Of 5.22%

India's retail inflation moderated further in December, due to easing in prices of vegetables and other food items.

India's consumer price index-based inflation moderated to 5.22% in December from 5.48% in November, according to data from the Ministry of Statistics and Program Implementation on Monday.

A Bloomberg poll of economists had pegged the median inflation estimate at 5.3% for December.

The Reserve Bank of India targets retail inflation at 4%, with a tolerance level of two percentage points on either side. In October, inflation was the highest in 14 months and in excess of the RBI's upper tolerance band, before easing in November and December.

On a monthly basis, retail inflation fell by 0.6% from October.

Food and beverage inflation eased further to 7.69% in December from 8.2% in November. This was led by vegetable prices cooling to 26.56% from 29.33% in the same duration.

Core inflation—that strips out volatile food and fuel prices—rose 3.6% compared to 3.7% in November.

The sharp sequential fall in vegetable prices in January 2025 is likely to augur well for the food and beverages inflation print for the month, which is expected to ease to five-month low of about 6.0-6.5% in the month, said Aditi Nayar, chief economist at ICRA. Consequently, ICRA estimates the headline CPI inflation to soften to about 4.5-4.7% in January 2025 from 5.2% in December 2024.

With the headline inflation stuck stubbornly above 5%, the probability of a rate cut in the February 2025 policy review has certainly receded, according to Nayar. However, the considerable decline in vegetable prices that is underway could convince some MPC members to consider an early cut in the upcoming meeting, with a view to supporting growth, she added. "It will be interesting to see the views of the MPC members on the timing of a rate cut amidst the recent depreciation of the INR vs. the USD."

• Cereal prices stood at 6.51% after rising by 6.9% in November.

• Inflation for meat and fish was 5.3% compared to a rise of 4.7% in the previous month.

• Inflation in milk rose 2.8% after rising by 2.9% in the preceding month.

• Inflation in pulses rose 3.83% after rising by 5.4% last month.

• Clothing and footwear inflation rose 2.74% compared to a rise of 2.8% in the previous month.

• Housing prices went up by 2.71% after rising by 2.9% last month.

For personal care products, inflation remains high at 9.7% which has been the factor that has kept FMCG demand under a cloud as stated by some companies, said Madan Sabnavis, chief economist at Bank of Baroda. Higher input costs have been responsible for this increase in prices, he added.