India’s retail inflation eased to a five-month low of 4.31 per cent in January from 5.22 per cent in December as food price inflation declined, government data released on Wednesday showed. Annual retail inflation in January was lower than economists’ estimate of 4.6 per cent.

Cooling inflation boosts the odds of another rate cut by the Reserve Bank of India. In February, the central bank cut its key policy rate for the first time in nearly five years to boost an economy that is expected to grow at its slowest pace in four years.

The government also announced sweeping income tax cuts in its February 1 budget to lift consumption.

Vegetable prices rose 11.35 per cent year-on-year, compared with a 26.6 per cent increase in December.

Prices of cereals rose 6.24 per cent against a 6.50 per cent gain in December, while those of pulses jumped 2.59 per cent compared to a 3.80 per cent growth in the previous month.

Winter harvests have helped moderate food prices, but warmer-than-usual temperatures in March could pose risks to crops like wheat.

The Reserve Bank of India sees inflation averaging 4.8 per cent in the current financial year that ends on March 31 and expects it to ease to 4.2 per cent next year.

The central bank targets inflation at 4 per cent within a tolerance band of 2 percentage points on either side.

Published on February 12, 2025