India’s Inflation Rate Likely Dropped to 4.60% in January Amid Rising Food Prices
New Delhi, [Date] – India’s retail inflation rate is expected to have moderated to 4.60% in January, according to government data, despite a worrying surge in food prices. The latest inflation rate, which measures the change in prices of everyday items, would mark a slight decline from December’s 4.72%, when it hit a three-month high.
Food prices, a major contributor to India’s inflation basket, continued to rise, with the prices of essential items like vegetables, fruits, and meat increasing. However, a moderation in fuel and manufactured goods prices helped ease overall inflationary pressures.
"Despite the uptick in food prices, our calculations suggest that inflation may have dropped to 4.60% in January due to the stabilizing prices of fuel and manufactured goods," said Soumya Kanti Ghosh, Group Chief Economic Adviser at State Bank of India.
India’s food inflation rate, which is a closely watched indicator, accelerated to 4.51% in January, up from 4.45% in December. Prices of vegetables, particularly potatoes, tomatoes, and onions, shot up by 11.33%, 14.55%, and 14.21%, respectively, on a year-on-year basis. Similarly, the prices of fruits, including bananas and apples, increased by 6.85% and 8.39%, respectively.
The Reserve Bank of India (RBI), the country’s central bank, has been keeping a close eye on inflation levels to determine the trajectory of its monetary policy. In its December monetary policy review, the RBI retained its policy rates, citing elevated inflation concerns. However, it also emphasized the need for inflation to be anchored around its medium-term target of 4%.
The latest inflation data will likely influence the RBI’s next policy review, scheduled for March. While a rate cut may be considered if inflation continues to ease, economists say that a sharp increase in food prices could still pose a risk to the overall inflation trajectory.
"Despite the moderation in inflation, food prices remain a key concern for the RBI," said Madhavi Arora, Lead Economist at Emkay Global Financial Services. "A sustained uptick in food prices could prompt the RBI to remain cautious on rates and prioritize price stability."
India’s government has been taking measures to contain inflation, including efforts to boost agricultural production, improve supply chains, and implement measures to control price volatility. The government has also been working to improve the logistics and infrastructure for the storage and transportation of essential commodities to ensure a stable food supply.
As the RBI continues to monitor inflation levels, policymakers will be keeping a close eye on food prices to ensure that they remain under control. While the latest inflation data may provide some respite, it is clear that the battle against inflation is far from over in India.
