Jan 13, 2025 05:10 PM IST
Food prices eased on the back of a slower pace of inflation in vegetable prices, which stood at 26.56% in December last year.
India’s retail inflation eased in December 2024 to a four-month low of 5.22% from a year ago, driven by cooling prices of perishable food commodities, brightening hopes of a rate cut by the central bank.
Data released by the statistics ministry on Monday showed that the rate of retail inflation in the food and beverage category, which had risen persistently in 2024, had slowed to 7.69% in December year-on-year. It had climbed 8.2% in the previous month.
Food prices eased on the back of a slower pace of inflation in vegetable prices, which stood at 26.56% in December last year compared to 29.33% the month before.
Despite the slowing pace of growth in prices, the Consumer Price Index-based rate of retail inflation stayed above the Reserve Bank of India’s 4% tolerance level, with two percentage points of deviation on either side.
Sticky food inflation, which have knocked household budgets, has been a key concern of the Reserve Bank of India.
The central bank left its benchmark interest rate unchanged at 6.5% in its December rate-setting meeting, the last meeting in 2024.
“The lower retail inflation print is encouraging. If prices cool further and stay range-bound, it could be less challenging for the central bank to lower the key interest rate,” said Abhishek Agrawal, an analyst with Comtrade.
Cereal prices for December 2025 came in at 6.51% against 6.9% in November. Inflation in pulses stood at 3.83% against 5.4% in the previous month. Cereals, pulses and vegetables were the main driver of inflation last year due to weather shocks.
Achieving the right balance between inflation and growth, a key trade-off for all economies, is “the most important task for the Reserve Bank of India”, former RBI governor Shaktikanta Das had said after presenting his decision not to cut rates.
The central bank has kept the repo rate steady for nearly 18 months after raising it by 250 basis points to 6.5% between May 2022 and February 2023. A basis point is one-hundredth of a percentage point.
A cut in the benchmark repo rate is key to boosting credit and investments by businesses to pull growth back up in Asia’s third largest economy.
India’s economy is projected to grow at its slowest pace in four years in 2024-25 on the back of weaker manufacturing and muted exports, with pressure building on the central bank to cut interest rates.
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