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India Retail Inflation Reduced : India’s retail inflation saw a significant drop in January, settling at 4.31%, largely due to a decline in food prices. This marks a sharp reduction from 5.22% in December and 5.1% in January 2023, as per the latest official data released on Wednesday.
Food inflation, a major component of retail inflation, also witnessed a steep decline, falling to 6.02% in January compared to 8.39% in December and 8.3% a year ago. The Reserve Bank of India (RBI) has been tasked with maintaining retail inflation at 4% with a margin of ±2%, making this decline a positive development.
Expert Opinions on the Inflation Trend
A Welcome Decline Amid Global Uncertainty
Dipanwita Majumdar, an economist at Bank of Baroda, Mumbai, emphasized that the fall in Consumer Price Index (CPI)-based inflation is a positive sign for economic policy, particularly in the face of ongoing global uncertainties. She pointed out that the reduction in inflation has been primarily driven by lower food prices and stable commodity costs.
Majumdar expects further relief in the coming months due to: Improved vegetable arrivals in markets A strong Rabi harvest Government interventions to stabilize food supply chains
However, she cautioned that imported inflation and a potential bottoming-out of the global commodity price cycle could pose risks to this trend.
Future Inflation Trends and RBI’s Next Move
Scope for an Interest Rate Cut? Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, Mumbai, noted that January’s inflation slowdown was sharper than expected, largely due to the substantial drop in food prices.
Key observations: Core inflation (which excludes food and fuel prices) inched up slightly to 3.7%
Inflation is expected to remain low in the coming months
The Monetary Policy Committee (MPC) may consider a 25 basis point rate cut if inflation remains controlled
However, Bhardwaj warned that rupee depreciation needs close monitoring, as it could impact domestic inflation levels.
