Informist Poll
Jan CPI inflation likely fell to 5-month low of 4.5%
This story was originally published at 17:34 IST on 6 February 2025
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By Shubham Rana
NEW DELHI – India's headline CPI inflation likely fell to a five-month low of 4.5% in January, driven by a sharp fall in vegetable prices, according to an Informist poll of 12 economists. CPI inflation was 5.22% in December and 5.10% in January 2024.
Economists' predictions for headline retail inflation in January range from 4.2% to 4.7%. The statistics ministry will release CPI data for January at 1600 IST on Wednesday.
"The reduction in vegetable prices in January provided the much-needed relief to consumers as well as markets, as the vegetable prices are the driving factor of CPI," Union Bank of India economists said in a note. According to data from the Department of Consumer Affairs, prices of tomato, onion, and potato were down 34.0%, 21.2%, and 16.1%, respectively, in January compared with December.
Prices of pulses and rice also declined in January, although those of wheat continued to climb. Teresa John, deputy head of research and economist at Nirmal Bang Institutional Equities, estimates 'food and beverage' inflation to have fallen to 6.1% in January from 7.7% in December.
The recent decline in vegetable prices has been such that economists see inflation averaging around 4% in Jan-Mar, lower than the Reserve Bank of India's forecast of 4.5%. "Global prices of edible oils too have softened, which is positive for domestic inflation trajectory. Prospects of higher production due to improvements in sowing of pulses and wheat in the ongoing rabi season, bodes well for domestic availability of these crops," said Aditi Gupta, an economist at Bank of Baroda.
Apart from vegetable prices, policymakers will also take comfort from subdued core inflation, which has remained below 4% for 13 months in a row. Core inflation--which does not include food and fuel items, whose prices can be volatile--is seen inching up slightly in January to around 3.7% from 3.6% in December due to an increase in gold prices. According to Union Bank of India economists, this could lead to inflation for the 'personal care and effects' sub-group in the 'miscellaneous' category of items creeping into double-digit territory from 9.70?cember.
Muted core inflation, according to economists, for a sustained period of time is reflective of subdued demand, contributing to weaker growth prints. As per the government's first advance estimate, India's GDP growth is seen moderating to a four-year low of 6.4% in 2024-25 (Apr-Mar).
Although the January inflation data will be released after the Monetary Policy Committee's interest rate decision on Friday, economists see the repo rate being lowered this week by 25 basis points to 6.25%, with falling vegetable prices and sub-4% core inflation providing enough space to bring down interest rates.
"While persistently elevated inflation until October had prevented monetary easing for the inflation-targeting central bank, we think the disinflation underway now provides space for the MPC to embark on rate cuts and focus on supporting growth," said Aastha Gudwani, India chief economist at Barclays.
The MPC has left the repo rate unchanged at 6.50% for two years. It last lowered the policy rate in May 2020.
The following is a summary of the poll on CPI inflation in January:
| ORGANISATION | CPI INFLATION ESTIMATE |
| Union Bank of India | 4.2% |
| ANZ Banking Group | 4.4% |
| HDFC Bank | 4.4% |
| STCI Primary Dealer | 4.4% |
| CareEdge Ratings | 4.5% |
| IDFC FIRST Bank | 4.5% |
| Kotak Mahindra Bank | 4.5% |
| Nirmal Bang Institutional Equities | 4.5% |
| Acuite Ratings and Research | 4.6% |
| ICRA | 4.6% |
| Bank of Baroda | 4.68% |
| India Ratings and Research | 4.7% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Akul Nishant Akhoury
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