Retail food inflation hits 5-month low

Retail food inflation eased for the third consecutive month, reaching a five-month low of 6.02% in January, driven by a decline in vegetable prices as winter crops arrived in markets. However, inflation in key food categories like pulses, edible oils, and cereals remained a concern. While overall food prices softened, specific commodities such as potatoes, onions, and wheat saw significant price increases.

Retail food inflation eased for the third consecutive month, reaching a five-month low of 6.02% in January, down from 8.39% in December. The decline came as winter crops arrived in markets, lowering vegetable prices. The consumer food price index (CFPI) dropped 2.9% sequentially in January. In comparison, food inflation stood at 8.3% in January last year.

Potato and onion prices surged by 49.61% and 16.35% year-on-year, respectively, while tomato inflation dropped by 7%. In contrast, tomato prices had declined by 47% in August last year. The vegetable category saw an overall inflation rate of 11.35% in January, reversing a sharp decline of 26.56% in December. However, edible oil inflation remained high at 15.64%, raising concerns due to India’s heavy reliance on imports, which account for about 58% of its edible oil consumption.

Madan Sabnavis, chief economist at Bank of Baroda, noted that despite seasonal relief in food prices, vegetable and fruit inflation remained above 10%. He also pointed out the rising edible oil inflation as a concern.

Inflation in pulses eased to 2.59% in January from a high of 113% in August 2024, driven by improved supply due to a strong kharif harvest and imports. However, pulses inflation had remained in double digits since June 2023 due to lower production of key varieties like chana, tur, and urad. The gram split variety recorded the highest price rise at 16.97% last month, while arhar prices fell by 0.5% due to a high base effect.

Cereal inflation remained in single digits at 6.24%, thanks to a bumper rice harvest. Wheat inflation stood at 8.8%. To curb price rises, the government is offloading 2.5 million tonnes of wheat from surplus stocks until March. Wheat sowing increased by 2.14% this rabi season, covering 31.97 million hectares.

Inflation in meat and fish was moderate at 5.2%, with chicken prices rising by 7.5%. Milk prices increased by only 2.85%. Meanwhile, spice inflation continued to decline, dropping 6.8% in January, with jeera prices falling by 32.25%.