India’s CPI inflation to ease to 4.7-4.8% in FY25, driven by low food prices: Report
The headline Indian Consumer Price Index (CPI) is expected to reach 4.7-4.8 percent in FY25, driven by favorable statistics, easing food inflation, and stable global commodity prices, according to a Bank of Baroda (BoB) report.
The arrival of fresh harvests of tomatoes, onions, and potatoes has seen high arrivals in the mandi, easing supply pressure.
December data shows another correction in vegetable prices, while favorable soil moisture and reserve levels are expected to support a strong Rabi harvest. Additionally, global food and energy prices are expected to keep food inflation risks low in the near term.
The BoB’s Economic Conditions Index (ECI) shows a slight sequential increase in prices in December, at 0.1 percent compared to 0.4 percent in November. The report suggests that these favorable inflation conditions may steer the Reserve Bank of India (RBI) towards a more accommodative monetary policy stance in the coming months, as demand-side pressures remain.
The report highlights that November 2024 CPI inflation fell to 5.5 percent, down from 6.2 percent in October 2024, helped by a broader decline in food prices.
Notably, the inflation rate of vegetables decreased significantly to 29.3 percent in November, compared to 42.2 percent in October. Basic staples such as pulses, fruits, and grains also saw price relief, attributed to a good Kharif harvest and seasonal factors.
Core inflation (excluding food and fuel) held steady at 3.7 percent in November 2024, with smaller demand-driven components showing lower momentum.
While there was a slight increase in clothing and household services during the holiday season, categories such as clothing and footwear remained stable. The fall in gold prices has contributed to a reduction in personal care inflation.
Month-on-month, headline CPI inflation fell for the first time since January 2024, with food inflation entering deflation territory at -0.6 percent in November, compared to a 2.6 percent increase in October. The report noted improvements in key sectors such as vegetables, oils, and fruits.
