India's December retail inflation eases to 5.22%
A customer pays cash to buy vegetables next to a QR code of Paytm, a digital payments firm, on display at a roadside market in Ahmedabad · Reuters

(Reuters) -India's annual retail inflation in December eased to 5.22% from 5.48% in the previous month as the rate of increase in food prices slowed, government data released on Monday showed.

A Reuters poll had projected retail inflation at 5.3%.

COMMENTS

RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE

"Improved supplies of perishables and expectations of winter disinflation in food components were reflected in slower rise in the food component. Yet sequential move led by oil & fats plus cereals was uncomfortable. Fuel disinflation extended into December."

"Markets will nonetheless pay attention to the spillover risks from a weaker rupee and rise in global oil prices. The inflation outcome is positive for the central bank, but rate cut expectations are getting countered by heightened global uncertainty."

ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM

"While CPI inflation declined to 5.2% in December 2024 from 5.5% in November 2024, the pace of the correction was narrower than expected."

"With the headline inflation stuck stubbornly above 5.0%, the probability of a rate cut in the Feb 2025 policy review has certainly receded. However, the considerable decline in vegetable prices that is underway could convince some MPC (monetary policy committee) members to consider an early cut in the upcoming meeting, with a view to supporting growth."

"It will be interesting to see the views of the MPC members on the timing of a rate cut amidst the recent depreciation of the INR vs. the USD."

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

"Easing food prices in December ought to provide some breathing space to the RBI (Reserve Bank of India) what with higher agricultural produce cooling down prices."

"Yet at above 5.0% Y/Y in December and unabated currency weakness, a February rate cut by may not be a done deal yet. All eyes would now on policies announced by Trump who would be taking charge on January 20 and its likely impact."

SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM

"The RBI could remain cautious in pre-emptively cutting interest rates and the possibility of a pause in the February 2025 policy is high. Our base has been for the rate cut cycle to begin by the April policy and our view remains unchanged."

"With rising expectation of a pause by the US Fed in the January policy and increasing depreciation pressures on the rupee, the RBI could be nudged towards delaying rate cuts."

"While the timing of the start of the rate cut cycle remains a close call, we expect the RBI to increase durable liquidity support in the form of either further cash reserve ratio cuts or open market operation purchases. In the absence of the same, liquidity conditions could remain tight and in deficit mode."