Inflation in food articles was 1.98% in April, compared to 1.90% in March. In non-food articles, inflation rose to 12.18% during April, 11.5% in the previous month, data released by the commerce and industry ministry showed. File
| Photo Credit: The Hindu

Daily essential products such as soaps, detergents, biscuits, packaged foods, and beverages are expected to get costlier as leading FMCG companies are preparing for calibrated price hikes on account of rising crude-linked inflation, higher packaging costs, and fuel expenses from geopolitical disruptions which are squeezing margins.

The executives of FMCG (fast-moving consumer goods) makers, which have already gone for price hikes of 3%-5% recently, in their latest earnings calls have indicated either ongoing price increases or readiness to raise prices further, citing inflationary pressure arising from volatile crude oil prices, higher logistics costs, currency depreciation, and disruptions in global supply chains amid geopolitical tensions.

This pressure is being felt across sectors, including food, personal care, beverages, and household products, as FMCG companies are attempting to balance their margins and are resorting to either price hikes or shrinking pack sizes, retaining the popular smaller SKUs of ₹5, ₹10 or ₹15 in the market, to maintain sales volumes.

Though FMCG companies are focusing on price elasticity and internal cost efficiencies such as trimming discounts and promotions, tightening inventory management, and streamlining supply chains to cushion the impact, consumers are still expected to bear part of the burden through calibrated price hikes and reduced grammage.

Home-grown FMCG maker Dabur India Global CEO Mohit Malhotra said the company is already facing 10% inflation this fiscal and has initiated price increases to cushion the impact.

“We have already implemented a 4% price increase across different parts of the business to partly mitigate this impact. We are also undertaking cost rationalisation initiatives. Despite inflation picking up in the India business, we expect growth this year to be in double digits, which will be a mix of both value growth through price increases along with volume growth,” said Mr. Malhotra.

Leading bakery products and biscuits maker Britannia has also indicated imminent price hikes to offset nearly a 20% rise in fuel and packaging costs due to geopolitical developments.

The company, known for brands such as Good Day, Marie Gold, Milk Bikis, and Tiger, is looking at both alternatives — a direct price increase and grammage reduction, said its managing director and CEO Rakshit Hargave.

“Yes, selectively, we will have to take price increases. And this includes both grammage adjustment and some of the packs which are above ₹10, some kind of a price increase,” he said while replying to a query. For larger pack sizes, the prices will increase.

Besides rising fuel costs, higher prices of laminates used in packaging are also a major pain point. Moreover, the company relies on LPG and PNG, whose inflationary impact is directly visible in operating costs, Mr. Hargave added.

Leading FMCG maker HUL, which has popular brands such as Surf Excel, Brooke Bond, Lifebuoy, Dove, Clinic Plus, Sunsilk, and Lakme, also signalled more price hikes if commodity pressures persist.

“We have seen a cost inflation of around 8%-10% so far on our material cost base. Against that, we have already taken a price increase to the extent of 2%-5% depending on portfolio to portfolio,” said HUL CFO Niranjan Gupta.

Crude oil-linked supply chains have been disrupted, pushing up commodity prices, while continued currency depreciation has further raised input costs, he said, adding the company will continue to evaluate the cost environment and undertake further pricing interventions if required.

“And as we navigate this, depending on how the costs pan out, we will be taking further price increases as may be necessary,” Mr. Gupta added.

Pidilite Industries, which owns popular brands such as Fevicol, Dr. Fixit, FeviKwik, and M-Seal, is bracing for another round of price hikes, said its managing director Sudhanshu Vats.

The company has already raised prices twice this year, in April and May, and is now evaluating further increases to offset a weighted average surge of 40%-50% in input costs.

“We will continue to pass that on in a calibrated fashion to the market,” he said, adding, “We will continue to remain focused on growth while remaining in our guided EBITDA corridor of 20%-24%.

In the beverages segment, Varun Beverages Chairperson Ravi Jaipuria said companies selling packaged water and beverages have already started cutting discounts amid rising costs, while further action could follow if fuel prices climb.

“We see the B-brands and the other players selling water, they have not increased the price, but they have reduced the discounts,” Mr. Jaipuria said.

He said the company remains covered for raw material requirements for the current quarter, but gasoline prices remain a vulnerable area.

“If the prices go up, then we will further reduce our discounting to some level,” he said.

Marico MD & CEO Saugata Gupta said while the company is benefiting from softer copra prices, cost pressures are being mitigated through “calibrated pricing actions” and cost management initiatives.

The company, which owns brands such as Parachute, Saffola, and Livon, has already taken price hikes of about 6%-7% in its valud added hair oil portfolio.

Tata Consumer Products Ltd managing director and CEO Sunil D’Souza also pointed to rising packaging and LPG-linked costs, although he said margin pressures remain manageable for now because of the company’s diversified portfolio.

Nestle India chairman and managing director Manish Tiwary said these times are volatile and difficult for anyone to predict what’s going to happen even two months down the line.

“So, that is something which we have to be ready for. So, that’s a little bit of a yellow flag in the future which we see,” he said.

Congress general secretary (communication) Jairam Ramesh
| Photo Credit: ANI

The Congress on Thursday (November 28, 2024) alleged that Prime Minister Narendra Modi’s entire focus is not on reducing inflation, but on showing low inflation figures, and said a government that is focused on propaganda and data manipulation is not one that can be relied on to work for people’s welfare.

Congress general secretary in-charge communications Jairam Ramesh said India has seen ten years of a “Modi-made inflation”, created and fostered by the government’s poor policy-making.

Also Read:India’s middle class tightens its belt, squeezed by food inflation

“The prime minister’s entire focus is not on reducing inflation, but on showing low inflation figures. The government is now concertedly attempting to manipulate the Consumer Price Index (CPI) and Wholesale Price Index (WP1) figures to show inflation as being under control, even as the ground reality is that the common man is facing non-stop price rise,” Mr. Ramesh said in a statement.

He said price rise has been particularly high for food, fuel, and items of daily use, and it has placed a heavy burden on India’s working class and middle class families.

Despite the fall in crude oil prices in the global market, petrol and diesel remain expensive in India, which has increased the cost of transportation and other services, the Congress general secretary said.

“Food inflation has been another concern that has underlined the high levels of overall inflation. Accordingly, the government is now preparing to reduce the weightage of food items in the Consumer Price Index (CPI). This is an attempt to hide the real impact of inflation, and an indication of the government’s priorities of massaging inconvenient data rather than acting on it,” he said.

“This attempted change in the CPI weightage is not only dishonest, it will also impact the incomes of an estimated 3-4 crore people, including government and semi- government employees,” he said.

Mr. Ramesh pointed out that dearness allowance and salary increments have already fallen compared to the UPA government – now they are set to fall further.

“This is not a new development. The Modi government has repeatedly tried to mislead the country by juggling data. Earlier, when the B.JP government started lagging behind the UPA government in GDP growth rate, an attempt was made to artificially increase the growth rate by changing the base year,” he said, adding the same game was played in employment promises.

The BJP initially promised two crore youth jobs every year and when unemployment started increasing, surveys and reports were stopped or modified to hide this reality, he alleged.

Mr. Ramesh said the employment criteria was changed to include self-employment and those who have taken on Mudra loans or temporary jobs.

“EPFO data was used to make claims on record job growth – though in reality the data measures EPFO enrolment alone,” he said.

Similarly, rather than set a transparent poverty line, the Government created a deceptive multi-dimensional poverty index to claim massive reductions in poverty, Mr. Ramesh said.

In the meantime, the poor have faced difficulty in taking advantage of welfare schemes due to this jugglery, he said.

“Despite the fall in crude oil prices internationally, the prices of petrol, diesel and LPG were increased. During the UPA government, information on comparison of India’s fuel prices with neighbouring countries was made public on the Petroleum Planning and Analysis Cell (PPAC) website. In keeping with its record of opacity, the government removed the data from its website,” he said.

Instead, it has allowed record profit-making by oil and gas companies, apart from extorting revenue of Rs 36 lakh crore from the public through taxes on petrol and diesel, the former Union minister said.

“A government that is focused on propaganda and data manipulation is not one that can be relied on to work for the people’s welfare. Such is the case with this government,” Mr. Ramesh said.

The Reserve Bank of India’s (RBI’s) inflation targeting regime has worked well and need not be abandoned in favour of a more discretionary regime that could be risky and counterproductive, a new research paper has said.

The paper titled ‘Inflation Targeting In India: A Further Assessment’ said the weight of food-price inflation in the CPI inflation basket should be reduced to better reflect the circumstances of Indian households.

“The RBI’s inflation targeting regime has worked well. Given this record, radical changes such as broadening its mandate or abandoning the target in favour of a more discretionary regime would be risky and counterproductive,” it said.

The paper is authored by economists Barry Eichengreen (University of California, Berkeley) and Poonam Gupta (NCAER).

In contrast, the paper noted that the 4% point target, +/-2 percentage point tolerance band and focus on headline inflation remain broadly appropriate.

“That said, the regime can be tweaked to improve performance,” it suggested.

The government and the RBI signed an inflation-targeting agreement in February 2015 and amended the RBI Act in May 2016.

The inflation target was set by the government in consultation with the RBI with the possibility of revisiting it after five years.

Accordingly, the government announced, via the Official Gazette, 4% Consumer Price Index (CPI) inflation as the target from August 5, 2016, with an upper tolerance limit of 6% and a lower limit of 2%.

For the most part, the paper pointed out that targets set under the inflation-targeting agreement have been met; and on almost all counts, it has performed as envisaged.

“It has been only once that inflation exceeded the upper tolerance band of 6% for three consecutive quarters (during January 2022-September 2022),” the paper said.

According to the paper, evidence points to improved outcomes during inflation targeting.

“Inflation is lower and less volatile; inflation expectations are better anchored, and the transmission of monetary policy is more effective,” it said.

Recently, Chief Economic Advisor V. Anantha Nageswaran had pitched for excluding food inflation from the rate-setting calls, saying that the monetary policy has no bearing on the prices of food items, which are dictated by supply-side pressures.

Finally, contrary to earlier scepticism, the paper argued that it does not appear that the inflation-targeting agreement has made the RBI overly hawkish or reactive to every small deviation in the inflation rate from its target of 4% or to every spike in food inflation.

Since September 2016, the RBI has changed the key policy rate 17 times, the majority of them during two turbulent years — in 2019-20 when the policy rate was eased five times by a cumulative 185 basis points in response to a sharp growth slowdown; and in 2022-23 when the policy rate was increased six times by a cumulative 210 basis points in response to accelerated inflation emanating from global shocks.

During the remaining six years, the policy rate was changed only six times, about once every year. Compared to this, the RBI changed its policy rate 24 times in the eight years prior to IT.

The survey found that specific measures were needed to stabilise prices of food items that recorded high inflation in recent times such as milk and edible oils
| Photo Credit: SANDEEP SAXENA

Inflation risk outlook in India is under control in the short run, but requires policy measures to achieve long-term price stability, according to the Economic Survey of India 2023-24, tabled in Parliament on Monday.

India’s inflation will align with target rates by 2025-26, considering normal monsoons and no further external shocks, Chief Economic Advisor V. Ananth Nageshwaran said in the Economic Survey.

Also read: Economic Survey 2023-24 updates

The RBI forecast a retail inflation of 4.5% in 2024-25 and 4.1% in the year after, citing the April Monetary Policy Report. “The short-term outlook for India is benign,” the survey added, while highlighting reasons and measures to achieve long-term measure stability, especially in food prices.

The CEA suggested the need for high frequency price data of essential food items to enable monitoring of prices at every stage of production – from farm to shelf – as part of a broader strengthening in the statistical system. The survey stressed the need to equip the Ministry of Statistics and Programme Implementation (MoSPI) to produce and integrate all required statistics in addition to increased quality and timeliness of data.

Constructing a producer price index for goods and services can help get a “greater grasp of episodes of cost-push inflation,” the CEA wrote in the Economic Survey. Mr. Nageshwaran suggested that the weightages of items in the consumer price index be revised according to the results of the recently released HCES 2022-23.

The survey found that specific measures were needed to stabilise prices of food items that recorded high inflation in recent times like pulses, tomato, onion, milk and edible oils.

Vegetable prices increased at a pace of 14.9% in 2023-24, significantly faster than the 3% print in the previous year. Uneven rainfall and region-specific diseases were responsible for onion and tomato inflation.  The CEA suggested the government assess the progress of modern storage facilities for crops such as tomato and onion, which are subject to seasonal price surges and availability of these during seasons of high demand.

Reduced production of pulses in the past two years, due to adverse weather conditions, were responsible for the increase in prices of the crop. Pulses recorded an inflation of 15.2% in the reporting year, significantly higher than the 2.4% recorded in 2022-23. Concentration of pulse production in a small number of states and districts was cited as one of the reasons for lower production and a subsequent price rise in the crop, the CEA added. 

An expansion in the area under pulses, especially tur, lentil and urad dal is needed to moderate the inflation in the crop, the survey found. The survey further suggested promoting summer cultivation of moong and urad in areas with assured irrigation.

An increase in edible oil consumption and a subsequent increase in import dependence were responsible for the increase of the crop.  Promoting domestic production of edible oils and expanding the scope of the National Mission on edible oil, beyond palm oil, can help moderate prices of oil seeds, the CEA said in the Economic Survey.

The CEA also suggested focused efforts to promote production of non-conventional edible oils, including rice bran and corn oil in addition to increasing production to major oils.

India’s wholesale prices rose 3.36% in June from a year earlier, government data showed on July 15, 2024. File
| Photo Credit: ANI

Inflation in India’s wholesale prices accelerated to 3.4% in June, the highest in 16 months, from 2.6% in May, led by a spike in food inflation to 8.7% and a near-doubling in the rise of manufactured products prices to 1.43%.

Pricier vegetables, cereals, and fruits spurred the rise in food prices paid by Indian consumers to a six-month high of 9.4% in June, escalating the headline retail inflation pace to a four-month high of 5.08% in June, from a revised 4.8% in May, as per data released on Friday.

The problem of high food inflation will be “less severe” in India going ahead, as modern supply chains with diversified sources can help quickly address sudden spikes in prices of specific food items, RBI Monetary Policy Committee (MPC) member Ashima Goyal said on April 25.

Stressing that the share of food in the household budget is high in India, Ms. Goyal said policy needs to focus on increasing agricultural productivity, since stable agricultural prices are important for non-inflationary growth.

Also Read | Extreme weather may pose risk to inflation, says RBI Bulletin

“As India develops, this problem (high food inflation) will get less severe, for a number of reasons. Modern supply chains with diversified sources respond quickly to large spikes in specific items,” she told PTI.

Ms, Goyal further pointed out that one does not hear of tomato or onion prices spiking in advanced economies.

“We naturally have diverse geographic regions, better integrated markets sourcing from different regions can help mitigate climate change induced food price spikes,” she said.

Moreover, as the weight of food in consumption falls and food consumption itself becomes more diversified, the impact and size of future food price shocks falls, she noted.

Ms. Goyal stressed that under flexible inflation targeting, expectations get better anchored.

She cited the example of East Asia, where food prices were allowed to rise and agriculture was subsidized only after food budget shares fell.

Also Read | Inflation drops to 10-month low in March, but no relief on food bills yet

“India unfortunately opted for a distorting system of subsidies to farmers as well as to consumers,” she said, adding that given India’s huge population this was very expensive and reduced the space for government investment in agriculture.

Besides, Ms. Goyal said it also kept inflation high as procurement prices rose each year.

She said agricultural productivity is finally rising supported by a policy reset, along with the availability of new technologies even though further policy adjustment is required, she stressed.

According to official figures, retail inflation declined to a five-month low of 4.85% in March, mainly due to cooling down of food prices. The inflation in the food basket was at 8.52% in March, down from 8.66% in February.

RBI Governor Shaktikanta Das has recently said that the baseline projections show inflation moderating to 4.5% in 2024-25, from 5.4% in 2023-24, and 6.7% in 2022-23.

Replying to a question on India’s current macroeconomic situation, Ms. Goyal said conditions have been created for sustainable and inclusive growth.

“We are seeing results since 2021 with continued robust growth, reduction in multi-dimensional poverty, more assets and infrastructure sustainably helping the lower income groups, more opportunities for youth,” she said.

Ms. Goyal said inequality has risen but the famous ‘Kuznets inverted U-curve’ tells us that this is normal in a period of high growth and should come down over time.

But for the economy to continue on such a path, the eminent economist said policy continuity is very important.

“Policy lessons on what worked must be internalized, domestic policy shocks avoided and external shocks smoothed, even as supply-side enabling reforms continue,” Ms. Goyal suggested.

She emphasised on the need of enhancing the economy’s resilience and diversity saying, “we live in troubled times of geopolitical, geoeconomic and climate fragilities.”

Also Read | Indian economy projected to grow 6.5% in 2024: UNCTAD

During 2023-24, the economy is likely to record a growth rate of near 8% on account of good performance of manufacturing and infrastructure sectors.

Recently, the International Monetary Fund (IMF) raised India’s growth projection to 6.8% for 2024, from its January forecast of 6.5%, citing bullish domestic demand conditions and a rising working-age population.

The Asian Development Bank (ADB) also raised India’s GDP growth forecast for the current fiscal to 7%, from 6.7% earlier, saying the robust growth will be driven by public and private sector investment demand and gradual improvement in consumer demand.

New Delhi:

Morgan Stanley is firm on India’s growth outlook, given the support it is getting from domestic demand. Citing high-frequency data, the global investment banking firm said it remains constructive on the growth outlook.

Against that backdrop, it expects India’s GDP growth to be at 6.8% in the current financial year 2024-25 and 6.5% in 2025-26.

On the macro side, it anticipates headline inflation to remain supported by favourable base effects. It projected inflation to be around 5% in the second quarter, before moderating to 4.1% year-on-year in the second half of 2024.

For the next financial year, it expects retail inflation to average at 4.5%.

Similarly, the current account deficit will likely remain benign, supported by strength in service exports, and within the policymakers’ comfort zone at 1-1.5% of GDP in 2025-26.

On monetary policy, it expects policy rates to remain steady at 6.5%.

“This is on the back of a shallower and deferred rate cut cycle for the Fed on the global front and improving productivity growth, a rising investment rate and inflation tracking above the target of 4% on the domestic front,” it explained.

Inflation remains the main concern for the Reserve Bank of India’s monetary policy committee members before it goes ahead and loosens its stance on key interest rates. As per the minutes of the latest monetary policy meeting released on Friday, there have been several mentions of uncertainties around inflation. Going ahead, food price uncertainties would continue to weigh on the inflation outlook, it said.

Pressure on food prices has been interrupting the ongoing disinflation process in India, posing challenges for the final descent of the inflation trajectory to the 4% target.

The RBI is currently focused on bringing down inflation to a 4% target on a durable basis.

Retail inflation in India is in RBI’s 2-6% comfort level but is above the ideal 4% scenario. In March, it was 4.85%. Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well.

Meanwhile, along anticipated lines, RBI kept the policy repo rate unchanged at 6.5% earlier this month, the seventh time in a row. The repo rate is the rate of interest at which the RBI lends to other banks.

Barring the latest pauses, the RBI raised the repo rate by 250 basis points cumulatively to 6.5% since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demands in the economy, helping the inflation rate decline.

India’s economy grew 7.2% in 2022-23 and 8.7% in 2021-22, respectively. As per the second advance estimates, real gross domestic product (GDP) expanded at 7.6% in 2023-24 on the back of a buoyant domestic demand.

India is set to remain the fastest-growing among major economies in 2024, according to the International Monetary Fund’s latest World Economic Outlook.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

A similar easing was recorded in pulses, whose prices rose 17.7% in March, 2024, from 18.5% in February.
| Photo Credit: Sushil Kumar Verma

India’s retail inflation moderated to a ten-month low of 4.85% in March from 5.1% in February, but food inflation remained sticky at 8.52%, little changed from the 8.66% recorded in the previous month as price rise accelerated in cereals and meat, while vegetables, pulses, spices and eggs remained in double-digit inflation.

While inflation for urban consumers cooled significantly from 4.8% in February to 4.14% in March, rural consumers had it harder as they experienced a slightly higher inflation of 5.45% in March compared with 5.34% in the previous month.

This trend was visible in the extent of food price rise as well, as it accelerated from 8.3% in February to 8.6% in March for rural India, while the food inflation for urban consumers dropped from 9.2% in February to 8.35% last month.

On a month-on-month basis, there was no change in the Consumer Price Index but the food price index inched up about 0.2% and economists reckoned that the ongoing heat wave could spike food inflation in coming months. Even as crude oil prices are firming up and an inflation spike in the US may delay hopes of interest rate cuts from the Federal Reserve, sticky food inflation at home could further dampen prospects of rate cuts from India’s central bank.

While March’s inflation rate is still aloof from the bank’s stated 4% target, average retail price rise in the last quarter of 2023-24 has been 5.01%, in line with the 5% average projected by the Reserve Bank of India (RBI).

The RBI, which last week called Inflation the elephant in the room that needs to return to the forest for good, expects retail inflation to ease to an average 4.5% this year from the 5.4% clocked in 2023-24. The ongoing April to June quarter is, however, expected to see an average inflation of 4.9%, as per the RBI.

Within the food basket, vegetables’ inflation cooled marginally from the seven-month high of 30.25% in February to 28.3% last month. A similar easing was recorded in pulses, whose prices rose 17.7% in March from 18.5% in February, eggs (up 10.33% from 10.7%), sugar (up 7.25% compared with 7.5% in February.

Also read | What causes inflation in India: Demand or supply issues? | Data 

However, the price rise in cereals spiked to 8.4% in March from 7.6% in the previous month, and rose to 6.4% for meat and fish, from 5.2% a month earlier. Spices inflation remained over double digits at 11.4%, moderating from 13.5% in February.

Food prices continue to be under pressure with cereals, vegetables, spices and pulses seeing high inflation and the present heat wave poses an upside risk,” said Bank of Baroda economist Madan Sabnavis, who added that recent price hikes by fast moving consumer goods firms is another monitorable.

Although inflation in household goods and services, as well as health and education, eased slightly from February levels, personal care and effects prices surged at a faster pace of over 6% in March from 5.2% the previous month.

“While core inflation continues to moderate, we remain wary of the heatwaves going ahead which could keep food inflation elevated and volatile in the summer months,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. Ms. Bhardwaj expects any possible interest rate cuts only in the latter half of this fiscal year, depending on monsoons’ performance, the trajectory of crude oil prices and the timing of the US Fed’s rate easing cycle.

Rating agency ICRA expects food and beverages inflation, which was 7.8% in March, to persist over 7% in April as well. “An intensification of the impending heatwave may worsen the seasonal uptick in prices of perishables, heightening the criticality of a favourable monsoon this year to keep food inflation in check and anchor inflationary expectations,” its chief economist Aditi Nayar stressed.

Retail inflation eased to a three-month low, official data show. File
| Photo Credit: Special Arrangement

India’s retail inflation eased to a three-month low of 5.1% in January from 5.7% a month earlier, with food price rise cooling a bit to 8.3% compared with 9.5% in December 2023.

January’s headline inflation pace is slightly higher than the 5% average projected by the Reserve Bank of India (RBI) last week for the current final quarter of 2023-24.

Any interest rate cut hopes will have to wait till at least August if not longer, as the Central bank expects inflation to average 5% in the April to June quarter as well, before it hits its stated inflation target of 4% in the next quarter.

While overall inflation faced by urban consumers dropped to 4.92% from 5.5% a month ago, food inflation remained sharp at 9%, sliding a tad from 10.4% in December. By contrast, rural consumers faced food inflation of 7.91% in January, down from 9% in December, but their overall price rise pace was higher than their urban counterparts at 5.34%.

On a month-on-month basis, the Consumer Price Index (CPI) dropped 0.11% while the Consumer Food Price Index fell 0.73%. A year ago, in January 2023, CPI inflation stood at 6.52%, while food price inflation stood at 6%.

Among food items, vegetables inflation remained above 27%, just slightly below the 27.6% recorded in December. The price rise in pulses also cooled marginally from 20.7% in December to 19.5% in January.

Cereals and spices inflation saw slightly better moderation, dropping from 9.9% and 19.7% in December to 7.8% and 16.4%, respectively. Fruits inflation also fell from 11.1% to 8.65% in January, while milk prices rose 4.6% compared with 5.1% in December.

Inflation in eggs, however, picked up pace to touch 5.6% in January, as did sugar and confectionary price rise which hit 7.5% from 7.1% a month earlier.

Most non-food items continued to see weaker upticks in prices compared to food items, with personal care and effects that had clocked a 7.3% rise in prices in December, dropping below 6%. Education inflation inched up a tad from 4.77% in December to 4.93% in January, but the pace of rise in healthcare costs dropped from 5.1% to 4.8%.

Half of the 22 major States for which the National Statistical Office calculates inflation rates registered a price rise below the national average of 5.1%, with Delhi recording the lowest inflation of 2.56%, followed by Madhya Pradesh (3.93%), Kerala (4.04%), and Tamil Nadu (4.12%).

On the other hand, five States reported inflation of over 6%, breaching the RBI’s tolerance threshold for price rise. Those States are Odisha (7.55%), Telangana (6.34%), Haryana (6.24%), Gujarat (6.21%), and Karnataka which witnessed 6.1% inflation in January.

“The correction in the inflation for food and beverages was led by a favourable base effect. While rabi sowing has caught up with last year’s level, reservoir storage remains well below the year-ago levels in most regions, continuing to imbue caution into the outlook for the rabi harvest,” Aditi Nayar, chief economist at rating firm ICRA, said.

CareEdge Ratings’ chief economist Rajani Sinha expressed concern about the persistent double-digit or high inflation in spices, pulses and cereals, despite a sequential moderation in vegetable and fruit prices. This, she said, poses a risk of potentially broadening price pressures and de-anchoring inflationary expectations.

“We foresee cumulative rate cuts of 50 to 75 basis points, commencing in the August 2024 Monetary Policy Committee meeting, and a stance change in the preceding review, after there is some visibility on the monsoon turnout,” Ms. Nayar reckoned. One basis point equals 0.01 percentage point.