(Reuters) -India’s annual retail inflation in December eased to 5.22% from 5.48% in the previous month as the rate of increase in food prices slowed, government data released on Monday showed.
A Reuters poll had projected retail inflation at 5.3%.
COMMENTS
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“Improved supplies of perishables and expectations of winter disinflation in food components were reflected in slower rise in the food component. Yet sequential move led by oil & fats plus cereals was uncomfortable. Fuel disinflation extended into December.”
“Markets will nonetheless pay attention to the spillover risks from a weaker rupee and rise in global oil prices. The inflation outcome is positive for the central bank, but rate cut expectations are getting countered by heightened global uncertainty.”
ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM
“While CPI inflation declined to 5.2% in December 2024 from 5.5% in November 2024, the pace of the correction was narrower than expected.”
“With the headline inflation stuck stubbornly above 5.0%, the probability of a rate cut in the Feb 2025 policy review has certainly receded. However, the considerable decline in vegetable prices that is underway could convince some MPC (monetary policy committee) members to consider an early cut in the upcoming meeting, with a view to supporting growth.”
“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.”
KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
“Easing food prices in December ought to provide some breathing space to the RBI (Reserve Bank of India) what with higher agricultural produce cooling down prices.”
“Yet at above 5.0% Y/Y in December and unabated currency weakness, a February rate cut by may not be a done deal yet. All eyes would now on policies announced by Trump who would be taking charge on January 20 and its likely impact.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“The RBI could remain cautious in pre-emptively cutting interest rates and the possibility of a pause in the February 2025 policy is high. Our base has been for the rate cut cycle to begin by the April policy and our view remains unchanged.”
“With rising expectation of a pause by the US Fed in the January policy and increasing depreciation pressures on the rupee, the RBI could be nudged towards delaying rate cuts.”
“While the timing of the start of the rate cut cycle remains a close call, we expect the RBI to increase durable liquidity support in the form of either further cash reserve ratio cuts or open market operation purchases. In the absence of the same, liquidity conditions could remain tight and in deficit mode.”
“Headline inflation is expected at 4.6% in Q4 FY25. For the full year, headline inflation is expected to average at 4.9% in FY25 and 4.2% in FY26. Inflation is expected to move to 4% by June 2025.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The fall in the CPI inflation has been across food and core inflation. The winter crop arrivals are further expected to keep food prices under check.”
“We expect the inflation trajectory to inch towards the RBI’s medium term goal of 4% over the next few months.”
“Softening inflation and growth trajectory provides room for the onset of rate cutting cycle in the upcoming February policy. However, we remain cautious on the global headwinds.”
GAURA SEN GUPTA, INDIA ECONOMIST, IDFC FIRST BANK, MUMBAI
“Daily food prices in January indicate even sharper month-on-month decline in food prices led by vegetables. Headline CPI inflation is likely to be below 5% going forward.”
“Indeed, FY26 CPI inflation is currently tracking below 4%. Domestic conditions are supportive of a rate cut in February. Growth condition remain mixed with weakness in urban demand and lesser support from government capex.”
“The forward trajectory of inflation is favourable… The only factor which could delay a rate cut is depreciation pressures on INR.”
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI
“The disinflation in food prices is expected to sustain in January as new supplies come through. While weakening INR and surge in crude oil prices are emerging risks, the weak demand will keep pricing power contained.”
“We continue to expect RBI’s monetary policy committee to cut policy repo rate by 25 bps in February 2025 policy as risks to domestic growth increase and RBI gives up control of the rupee to embrace monetary independence as elevated and firm U.S. dollar limits RBI’s degrees of freedom.”
DIPANWITA MAZUMDAR, ECONOMIST, BANK OF BARODA, MUMBAI
“The correction in CPI broadly shows the reversal in trajectory of major sub-components of vegetable inflation which were considerably sticky throughout the year.”
“The wholesale market arrivals of these items have improved which was reflected in lower prices. Thus, favourable supply dynamics remain conducive for overall food inflation outlook.”
“However, risks might arise from imported inflation from a depreciating currency and also pressure on energy prices due to ongoing sanctions.”
(Reporting by Nishit Navin, Anuran Sadhu, Kashish Tandon and Hritam Mukherjee in Bengaluru and Siddhi Nayak in Mumbai; Editing by Mrigank Dhaniwala)
