India's January inflation cools to 4.31% as food prices moderate
What's the story
India's retail inflation has witnessed a sharp decline, dropping to 4.31% in January from 5.22% in December last year.
The decline is mainly attributed to a slowdown in the rise of food prices.
The drop was sharper than expected by analysts. A Reuters poll had predicted January's inflation rate would be around 4.6% respectively.
Rural inflation stood at 4.64% compared to 5.76% in December, while urban inflation cooled to 3.87% in January as against 4.58% in the previous month.
Economic relief
Impact of inflation drop on households
The fall in inflation is expected to provide relief to many Indian households, who spend a large chunk of their budgets on food.
The development is also likely to be welcomed by the Reserve Bank of India (RBI), which had recently cut the repo rate by 25 basis points.
India's retail inflation had soared to a 14-month-high of 6.2% in October last year, with food inflation peaking at a 15-month-high of 10.9%.
Market dynamics
Factors contributing to moderation in food prices
The arrival of fresh winter produce in local markets has moderated the rise in food prices, which make up about half of the consumer price index (CPI) basket.
Economists say falling vegetable prices have contributed significantly to this trend.
Dhiraj Nim from ANZ Research said, "Vegetable prices eased notably in January, thanks to fresh crop arrivals."
This will give RBI some leeway in its new focus on combating slowing economic growth as overall inflation remains above its 4% medium-term target.