India's Retail Inflation Declines to a 4-Month Low of 5.22% in December

New Delhi, Jan 13 (NationPress) India’s retail inflation rate, based on the Consumer Price Index, decreased to a 4-month low of 5.22% in December as the prices of vegetables, pulses, and sugar decreased during the month, offering a reprieve to household budgets, according to figures released by the Ministry of Statistics on Monday.

This reduction in inflation indicates a consistent downward trend after reaching a 14-month high of 6.21% in October. CPI inflation had dropped to 5.48% in November.

The fall in retail inflation in December was primarily due to the decline in the price surge of essential food items.

“In December, a notable decrease in inflation was reported for vegetables, pulses, sugar and confectionery, cereals, and personal care & effects,” noted a statement from the Ministry.

The year-on-year housing inflation rate for December stands at 2.71%, down from 2.87% in November. The housing index is compiled exclusively for the urban sector.

The five items exhibiting the highest year-on-year inflation at the national level in December 2024 are Peas (Vegetables) (89.12%), Potato (68.23%), Garlic (58.17%), Coconut Oil (45.41%), and Cauliflower (39.42%). In contrast, the key items with the lowest year-on-year inflation in December 2024 are Jeera (-34.69%), Ginger (-22.93%), Dry Chillies (-10.32%), and LPG (excluding conveyance) (-9.29%), as per official data.

The decline in inflation is a positive development, especially since it was the first instance where the retail inflation rate surpassed the RBI's upper limit of 6% in October. The RBI is anticipating retail inflation to stabilize around 4% sustainably before considering any interest rate cuts to stimulate growth.

In its latest policy review, the RBI reduced the cash reserve ratio (CRR) for banks by 0.5% to enhance the availability of funds for lending aimed at boosting economic growth, while keeping the key policy repo rate steady at 6.5% with a focus on inflation.

The CRR has been decreased from 4.5% to 4%, which will inject Rs 1.16 lakh crore into the banking system and help lower market interest rates.

This monetary policy decision seeks to maintain a delicate balance between managing inflation and enhancing the growth rate in a slowing economy.

In his previous monetary policy assessment, former RBI Governor Shaktikanta Das stated, “India’s growth narrative remains intact. Inflation is on a downward trajectory, but we must not overlook the significant risks in the outlook. This risk cannot be underestimated.”

He expressed optimism regarding the economic outlook, noting that “the balance between inflation and growth is well positioned.”