India’s retail inflation eased to a three-month low of 5.1% in January from 5.7% a month earlier. Food price rise cooled slightly to 8.3% compared with 9.5% in December 2023.
Reserve Bank of India’s Projection
- The headline inflation pace in January slightly exceeded the 5% average projected by the Reserve Bank of India (RBI) for the final quarter of 2023-24.
Interest Rate Cut Expectations
- Any interest rate cut hopes will likely be delayed until at least August, as the RBI expects inflation to average 5% in the April to June quarter.
Urban vs. Rural Inflation
- Overall inflation for urban consumers dropped to 4.92% from 5.5% a month ago.
- Food inflation for urban consumers remained high at 9%.
- Rural consumers faced higher overall price rise at 5.34%, with food inflation at 7.91% in January.
Month-on-Month Changes
- The Consumer Price Index (CPI) dropped by 0.11% month-on-month.
- Consumer Food Price Index fell by 0.73% month-on-month.
Food Item Inflation
- Vegetables inflation remained high at above 27%.
- Pulses inflation cooled slightly to 19.5% in January.
- Cereals and spices inflation moderated, with cereals at 7.8% and spices at 16.4%.
- Fruits inflation fell to 8.65% in January, while milk prices rose by 4.6%.
Non-Food Item Inflation
- Most non-food items saw weaker upticks in prices compared to food items.
- Personal care and effects prices dropped below 6%.
- Education inflation slightly increased, while healthcare costs dropped.
Regional Inflation Variances
- Half of the 22 major States registered a price rise below the national average of 5.1%.
- Some States reported inflation over 6%, breaching the RBI’s tolerance threshold.
Economist Perspectives
- Economists express concerns about persistent high inflation in spices, pulses, and cereals.
- Rate cuts of 50 to 75 basis points are anticipated, commencing in the August 2024 Monetary Policy Committee meeting, depending on the monsoon outlook.
Multiple Choice Questions (MCQs) with Answers:
- What was India’s retail inflation rate in January 2024?
- A) 5.7%
- B) 5.1%
- C) 4.92%
- D) 9.5%
- Answer: B) 5.1%
- Which projection did the Reserve Bank of India (RBI) make for the final quarter of 2023-24?
- A) 4.5%
- B) 5%
- C) 6%
- D) 7%
- Answer: B) 5%
- What is the anticipated timeline for any interest rate cut?
- A) April
- B) May
- C) June
- D) August
- Answer: D) August
- Which sector experienced higher food inflation in January 2024?
- A) Urban consumers
- B) Rural consumers
- C) Both had equal food inflation rates
- D) Non-food sector
- Answer: B) Rural consumers
- Which food item saw the highest inflation in January 2024?
- A) Vegetables
- B) Milk
- C) Fruits
- D) Pulses
- Answer: A) Vegetables