India’s Wholesale Inflation Falls to 2.31%, Retail at 5-Month Low

India’s wholesale inflation eased to 2.31% in January 2025, slightly down from 2.37% in December 2024, according to data from the Ministry of Commerce & Industry. This decline follows a significant drop in consumer price index (CPI)-based retail inflation, which fell to 4.31% in January, marking a five-month low from 5.22% in December. The key factor behind this easing inflation was a fall in food prices, which helped relieve inflationary pressure on consumers and policymakers.

Despite the decline in headline inflation, core inflation—which excludes food and fuel—rose to 3.9% in January from 3.8% in December, while services inflation increased to 3.6% from 3.5% in the previous month. This indicates persistent price pressures in healthcare, education, and housing, even as overall inflationary trends softened.

With inflation cooling, the Reserve Bank of India (RBI) implemented its first repo rate cut in nearly five years, lowering it from 6.5% to 6.25% to support economic growth. However, further rate cuts may not be imminent due to concerns over a weak rupee and a cautious US Federal Reserve stance.

The decline in wholesale inflation signals stability, aided by falling food prices, stable crude oil rates, and steady manufacturing costs. Meanwhile, retail inflation fell largely due to a sharp drop in vegetable prices and steady cereal prices, though milk and dairy products saw slight price increases.

Despite these positive trends, rising core inflation and global economic uncertainties remain key concerns. The US Federal Reserve’s delay in rate cuts, rupee depreciation risks, and geopolitical trade tensions could impact India’s economic stability. As a result, further RBI rate cuts are uncertain, and policymakers will closely monitor global commodity prices, currency movements, and demand trends.

The latest data presents a mixed outlook, with easing wholesale and retail inflation countered by sticky core inflation. While the RBI’s rate cut is a step toward economic stimulus, external risks and inflationary pressures will shape future policy decisions. Investors and businesses should remain cautious, as inflation trends and interest rates will significantly impact market movements and borrowing costs in the coming months.