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Published: February 13, 2024
Updated: February 13, 2024

Retail Inflation Dips to Three-Month Low in January, Signals Economic Resilience

In January 2024, annual retail inflation witnessed a significant drop to 5.1%, marking its lowest level in three months. This decline, from 5.69% in December, aligns with projected expectations and reflects a promising trend in the economic landscape.

Factors Driving the Slowdown:

The deceleration in inflationary pressures can be attributed to favourable base effects from the previous year. Notably, January 2023 witnessed a surge in inflation, making the current comparison more favourable. Additionally, the moderation in food prices has contributed to this downward trend.

Impact on Food Prices:

Food inflation saw a notable reduction, declining to 8.3% from 9.5%. This downward trajectory encompassed various food categories, including vegetables, pulses, spices, and fruits. Notably, prices rose less sharply or continued to decline in these segments, reflecting improved affordability for consumers.

Trends Across Consumer Goods:

Beyond food, other consumer goods also exhibited a slowdown in price growth. Sectors such as pan, tobacco, intoxicants, clothing, footwear, miscellaneous items, and housing experienced moderation in price increases. Furthermore, the prices for fuel and light witnessed a marginal decline, signalling stability in energy costs.

RBI's Projections and Policy Stance:

The Reserve Bank of India (RBI) has projected inflation to average 5.4% for the fiscal year, with a further decrease to 4.7% in the subsequent year. Governor Shaktikanta Das has reiterated the central bank's commitment to achieving a 4% inflation target. He emphasized the multifaceted approach of the RBI, considering various economic factors beyond just inflation when formulating policies.

The dip in retail inflation to a three-month low in January 2024 reflects a positive trajectory for the economy. With concerted efforts from regulatory bodies like the RBI and favourable market dynamics, there's optimism for continued stability and growth. However, vigilance remains crucial, as external and domestic factors can pose challenges to sustaining this downward trend in inflation.