Jan retail inflation eases to 4.31%, industrial output grows 3.2% in Dec

January 2025 CPI-based inflation: Food inflation fell to 6.02 per cent in January 2025, the lowest since August 2024

India's retail inflation likely eased to 4.6 per cent in January 2025 from 5.22 per cent in December, as food price increases slowed. This marks a decline of 91 basis points in headline inflation compared to the previous month, making it the lowest year-on-year inflation since August 2024.  Meanwhile, India’s industrial output growth declined to 3.2 per cent year-on-year in December 2024, compared to 5.2 per cent in November.

 

A Reuters poll had previously estimated January inflation at 4.6 per cent, highlighting a continued downward trend that brings inflation closer to the mid-range of the Reserve Bank of India’s (RBI) tolerance band of 2-6 per cent.

 

 

The decline in inflation is a positive development for Indian households, which allocate a significant portion of their income to food. With food prices easing, disposable incomes may experience some relief. 

 

The easing inflation is also expected to be welcomed by the RBI, which recently cut the repo rate by 25 basis points to 6.25 per cent in an effort to support economic growth.

 

Items with lowest inflation

 

Among the items that recorded the lowest year-on-year inflation in January 2025, jeera saw a significant decline of 32.25 per cent, while ginger prices dropped by 30.92 per cent. Dry chilies became cheaper by 11.27 per cent, and brinjal prices decreased by 9.94 per cent. Additionally, LPG, excluding conveyance costs, recorded a decline of 9.29 per cent.

 

December CPI trends

 

India’s CPI inflation for December 2024 stood at 5.22 per cent, easing from 5.48 per cent in November. The decline in December was primarily attributed to lower prices of key food items, including vegetables, pulses, sugar, and cereals. 

 

Food inflation

Food inflation, measured by the Consumer Food Price Index (CFPI), recorded 6.02 per cent in January 2025, making it the lowest level since August 2024. Food inflation in December 2024 was 8.39 per cent.

 

Rural vs urban inflation

 

In January 2025, rural inflation dropped to 4.64 per cent, while urban inflation fell to 3.87 per cent. This marked a further decline from December 2024, when rural inflation was recorded at 5.76 per cent and urban inflation stood at 4.58 per cent. 

Industrial output growth

 

India’s industrial output growth slowed to 3.2 per cent year-on-year in December 2024, compared to 5.2 per cent in November. Among the three major sectors, mining grew by 2.6 per cent, manufacturing expanded by 3.0 per cent, and electricity generation increased by 6.2 per cent.

 

Despite the overall slowdown, some industries contributed positively to growth in December. The manufacture of basic metals recorded an expansion of 6.7 per cent, while the manufacture of electrical equipment saw a substantial rise of 40.1 per cent. The manufacture of coke and refined petroleum products also grew by 3.9 per cent, providing some support to industrial activity.

   

CPI-based inflation projections by RBI

 

Last week, the RBI retained its CPI-based inflation forecast at 4.8 per cent for the financial year 2024-25 (FY25), expecting a slight decline to 4.4 per cent in the final quarter (Q4FY25). Looking ahead to FY26, inflation is estimated at 4.2 per cent, with the following quarterly projections:

 

Q1FY26: 4.5 per cent (down from 4.6 per cent)

Q2FY26: 4 per cent (unchanged)

Q3FY26: 3.8 per cent

Q4FY26: 4.2 per cent