India’s retail inflation eased to 4.31% in January 2025, marking its lowest level in five months. This is a significant drop from 5.22% recorded in December 2024. The primary reason behind this decline is a reduction in food prices, which have been rising sharply in recent months.
The fall in inflation is mainly due to food inflation cooling down to 6.02% from 8.39% in December. Prices of vegetables, cereals, and edible oils have stabilized, bringing some relief to consumers. Lower fuel prices also contributed to the overall decline.
With inflation slowing down, experts believe that the Reserve Bank of India (RBI) may introduce further rate cuts to boost economic growth. In its latest policy meeting, the RBI reduced its benchmark interest rate by 0.25 percentage points to 6.25%. This marks the first rate cut in nearly five years.
Economists predict that if inflation remains under control, the central bank may cut rates by up to 75 basis points this year. This move would make borrowing cheaper, encouraging businesses and consumers to spend more, which could help revive the economy.
Despite the current decline, challenges remain. Rising global oil prices, currency fluctuations, and supply chain disruptions could affect inflation in the coming months. However, the RBI expects inflation to stay around 4.5% for the 2024-25 financial year and reach its long-term target by 2025-26.
For now, the drop in inflation is a positive sign for consumers and policymakers. It provides room for economic growth while keeping price stability in check.
