CPI Inflation Drops to 4.31%—How This Affects Your Budget, Here’s Why
India’s retail inflation, measured by the Consumer Price Index (CPI), dropped to a five-month low of 4.31% in January 2025, according to data released by the Ministry of Statistics on Wednesday. This decline comes as a result of falling prices of vegetables and pulses, providing some relief to household budgets.
New Delhi: India’s retail inflation, measured by the Consumer Price Index (CPI), dropped to a five-month low of 4.31% in January 2025, according to data released by the Ministry of Statistics on Wednesday. This decline comes as a result of falling prices of vegetables and pulses, providing some relief to household budgets.
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Inflation Eases After Peak in October 2024
The January inflation figure marks a significant improvement from the 14-month high of 6.21% recorded in October 2024. Inflation had reduced to 5.48% in November and further to 5.22% in December 2024. The steady decline reflects a positive trend in managing inflation levels.
Food Inflation Declines to 6.02% in January
Food inflation, which directly impacts households, stood at 6.02% in January 2025. This is the lowest food inflation rate since August 2024. Key factors contributing to this decline include the easing of prices for vegetables, pulses, cereals, and other essentials.
Key Items Driving Inflation: Coconut Oil, Potato, Garlic
Despite the overall decline, certain items saw significant price hikes. The top five items with the highest year-on-year inflation in January 2025 include:
- Coconut oil: 54.20%
- Potato: 49.61%
- Coconut: 38.71%
- Garlic: 30.65%
- Peas (vegetables): 30.17%
Falling Inflation in Key Essentials
On the other hand, some items experienced notable deflation, including:
- Zeera (cumin): -32.25%
- Ginger: -30.92%
- Dry chillies: -11.27%
- Brinjal: -9.94%
- LPG (excluding conveyance): -9.29%
Fuel and Light Inflation Continues to Drop
Fuel and light inflation remained negative at -1.38% in January 2025, continuing the downward trend seen in December 2024, when it stood at -1.33%. This decrease in fuel prices contributed to the overall easing of inflation.
RBI’s Monetary Policy Adjustment to Foster Growth
In response to the declining inflation, RBI Governor Sanjay Malhotra announced a 25 basis point reduction in the policy rate, bringing it down from 6.5% to 6.25%. This move is aimed at fostering economic growth amid global uncertainties.
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The RBI’s decision to maintain a neutral monetary policy stance, focusing on inflation control while supporting growth, allows for more flexibility in managing the macroeconomic environment. As inflation continues to moderate, the RBI is expected to have more room to adopt a softer monetary policy, potentially boosting credit availability and fueling business and consumer spending.
Outlook for the Future
With inflation showing a consistent downward trend, experts expect the rate to gradually align with the RBI’s target, allowing for a more conducive environment for economic growth in India.
