India's Inflation Drops to 5.22% in December 2024

2025-01-13 global

Mumbai, Monday, 13 January 2025.
India’s inflation rate fell to 5.22% in December 2024, the lowest since August, driven by a decline in food prices, potentially influencing the Reserve Bank of India’s monetary policy.

Detailed Analysis of December’s Inflation Data

The December inflation figure represents a notable decrease from November’s 5.48% [1][2], falling within the Reserve Bank of India’s (RBI) tolerance band of 2-6% [4]. This decline was primarily driven by moderating food prices, with food inflation easing to 8.39% from 9.04% in November [1][3]. The urban-rural divide was significant, with urban inflation at 4.58% and rural inflation at 5.76% [3][5].

Food Price Dynamics

A detailed examination of food commodities reveals significant price variations. Peas showed the highest inflation at 89.12%, followed by potatoes at 68.23% and garlic at 58.17% [4][5]. However, some items experienced deflation, with jeera (cumin) showing the steepest decline at -34.69% [4]. Vegetable inflation notably decreased to 26.56% from 29.33% in November [1], suggesting improving supply conditions.

Regional Variations and Core Metrics

The inflation impact varies significantly across India’s regions. Seven out of 22 states recorded inflation above 6%, with Chhattisgarh leading at 7.63%, followed by Bihar at 7.4% [5]. Delhi maintained the lowest inflation rate at 2.5% [5]. Core inflation, which excludes volatile food and fuel prices, showed improvement, decreasing to 3.6% from 3.7% in November [3].

Future Outlook and Policy Implications

The inflation trajectory suggests potential monetary policy shifts ahead. Experts from Capital Economics forecast a 25 basis point cut to the repo rate, bringing it to 6.25% [1]. The RBI projects an inflation rate of 4.8% for the fiscal year ending March 2025 [1], though inflation is not expected to meet the central bank’s 4% medium-term target until at least the second half of 2026 [3]. ICRA economists predict further easing, estimating headline CPI inflation to soften to approximately 4.5-4.7% in January 2025 [3][6].

Sources

inflation India