Retail inflation fell to a three-month low of 5.48% in November 2024, sparking optimism about a potential rate cut by Reserve Bank of India (RBI) in 2025. This decline, primarily driven by cooling food prices, marks a significant step toward stabilizing economy after a volatile period.
Key Drivers of Inflation Decline
decrease in inflation was supported by notable reductions in prices of essential food items such as vegetables, cereals, and pulses. However, other categories like meat, oil, and fats recorded price increases, reflecting a mixed pattern in food inflation.
| Category | Price Movement |
| Vegetables | Significant Decline |
| Cereals | Decline |
| Pulses | Decline |
| Meat | Increase |
| Oil and Fats | Increase |
Industrial Output and Economic Indicators
October witnessed a 3.5% year-on-year rise in industrial output, driven by strong performance in consumer durables and garment manufacturing. This growth coincided with festive season, providing a much-needed boost to manufacturing sector. Despite this positive trend, challenges persist in key sectors like mining and electricity, indicating need for targeted policy interventions to sustain growth.
| Sector | Performance |
| Consumer Durables | Strong Growth |
| Garment Manufacturing | Positive Performance |
| Mining | Sluggish Growth |
| Electricity | Sluggish Growth |
RBI’s Monetary Policy Outlook
With inflation subsiding, RBI may consider a rate cut as early as February 2025. central bank aims to maintain inflation within its target band of 2-6%. Its current projection for Consumer Price Index (CPI) inflation in FY25 stands at 4.8%, with further reductions anticipated in coming quarters. Economists emphasize importance of a favorable rabi crop harvest to sustain this downward trend in food inflation.
| Inflation Metrics | Current Value (November 2024) |
| CPI Inflation | 5.48% |
| Core Inflation | 3.9% |
Calls for Lower Interest Rates
Key government officials, including Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal, have been advocating for lower interest rates to stimulate economic growth. They argue that reduced borrowing costs could encourage investment and consumption, providing a further boost to recovering economy.
Challenges and Concerns
While inflation data and industrial output offer reasons for optimism, industrial landscape remains fragile. Economists have raised concerns about subdued investment appetite and broader inefficiencies in economy. sluggish performance in sectors like mining and electricity underscores need for comprehensive reforms to ensure long-term recovery.
Future Prospects
Economists are hopeful that easing food inflation, coupled with a successful rabi crop season, will pave way for further reductions in overall inflation. If these conditions persist, RBI may implement rate cuts by mid-2025, aligning monetary policy with economic growth objectives.
Disclaimer
This article is based on publicly available data and expert analysis as of December 2024. information provided is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult financial professionals before making investment decisions.
