According to a Bank of Baroda analysis, India's Consumer Price Index (CPI) inflation is expected to drop from 5.5% in November to 5% in December 2024.
Due in large part to a notable decline in the cost of essential vegetables like potatoes, tomatoes, and onions, the report projects an upbeat inflation prognosis. "From 5.5% in November 2024 to 5% in December 2024, we anticipate that the CPI will moderate. As the prices of potatoes, tomatoes, and onions continue to see significant corrections, the inflation outlook is still favourable, the research said.
Additionally, the survey noted that the prices of these veggies dropped significantly in the first five days of January 2025, ranging from 9.8% to 22.7%. Improved arrivals at mandis, which are anticipated to support reduced vegetable prices in the upcoming months, have been blamed for this reduction.
A favourable inflation environment is also supported by global trends, and stable edible oil prices are probably going to continue to decline. It is anticipated that sufficient domestic supply of pulses and cereals will control their prices.
Nonetheless, the analysis identified a possible risk associated with the Indian rupee's depreciation, which could result in increased inflation from imports.
In December 2024, the Bank of Baroda Economic Index (BoB ECI) showed a 0.5% consecutive fall, indicating a reduction in inflationary pressures. The base impact caused just a slight revision to the index on an annual basis.
According to the survey, the cost of vegetables, especially potatoes, tomatoes, and onions, has significantly decreased over time. It is anticipated that this decrease will be crucial in reducing the inflation of the Consumer Price Index (CPI) in December 2024.
"We see a sharp correction in the prices of vegetables, including tomatoes, onions, and potatoes, which is likely to be reflected in the December CPI figures," said the report.
Due to stabilising food costs and good global commodity trends, the overall inflation forecast is still optimistic. The study did, however, issue a warning about possible dangers arising from outside variables, such changes in exchange rates, which can affect the course of inflation.
It is anticipated that both consumers and policymakers will benefit from the slowdown of CPI inflation, which indicates a lessening of pricing pressures in the economy.
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