Food Prices Ease, Inflation Drops
Sumeet Agarwal
CA Finalist || Content Writer || NISM-Certified in Research Analysis & Equity Derivatives || Passionate about Equity Research, Financial Modelling & Valuations
According to the provisional Government data released last Wednesday, Retail Inflation has shown signs of easing and has hit its five-month low in January. Thanks to a slowdown in food price inflation, retail inflation declined to 4.31% in January from 5.22% in December, a remarkable 20% cutback month-on-month.
Currently, the Retail Inflation is well within RBI's medium-term target of 4-6%.
Reduction in both Rural and Urban Inflation was witnessed leading to correction in the Combined Inflation.
Annual food inflation
Food inflation in India eased to 6.02% in January 2025, the lowest in five months, compared to 8.39% in December. This decline can be mainly attributed to lightening in inflation of Vegetables, Egg, Cereals, Pulses & Products.
While overall food inflation has been slowing since December, the prices of meat and fish, eggs and fruit have remained high.
Top five items with highest YoY inflation in January 2025
A sudden surge in exports and shifting consumer preferences due to its heath benefits have skyrocketed coconut prices to a 7 year-high on January. It has adversely impacted the margins of Hair/vegetable oil manufacturers like Marico where coconut serves as a key commodity.
Sectors ne kaisa perform kiya?
Sectors such as Housing, Health, Transport & Communication were identified by increasing YoY inflation for January relative to the previous month. However, in Education growth in in inflation witnessed a slight moderation.
The YoY fuel and light inflation rate for the month of January was -1.38 per cent. The corresponding inflation rate for the month of December 2024 was -1.33 per cent as fuel prices have been coming down.
Industrial output growth
India’s industrial output growth slowed in December after hitting a four-month high in November. The IIP growth rate for the month of December 2024 was 3.2% down from 5.2% in the month of November 2024.
Out of a total of 23 industry groups, 16 showed positive growth. Top 3 being:
On analyzing the corresponding growth rates of IIP as per Use-based classification in December 2024 over December 2023, Primary goods, Capital Goods, Consumer Durables and Infrastructure/Construction Goods emerge as the top 3 contributors.
This gradual easing in Inflation aligns well with RBI's medium-term target of extending a much-needed relief to consumers. Despite this easing in inflation, certain sectors such as Housing, Health, and Transport & Communication are still experiencing rising costs. Meanwhile, industrial output growth has also shown some moderation.
Moving forward, it will be crucial to monitor these trends closely to ensure sustainable economic growth and stability.