India’s Retail Inflation Moderates in January 2024, but Food Prices Remain a Concern

India’s Retail Inflation Moderates in January 2024, but Food Prices Remain a Concern

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:

  1. 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%
  2. 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%
  3. What is the anticipated timeline for any interest rate cut?
    • A) April
    • B) May
    • C) June
    • D) August
    • Answer: D) August
  4. 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
  5. Which food item saw the highest inflation in January 2024?
    • A) Vegetables
    • B) Milk
    • C) Fruits
    • D) Pulses
    • Answer: A) Vegetables