Inflation Eases, RBI Policy to Shift Focus

Retail inflation in India fell to a four-month low of 5.22% in December, primarily due to a drop in food prices. This decline provides room for the Reserve Bank of India to potentially lower interest rates. Experts predict that further cuts could support economic growth in the upcoming year.

In a welcome development for the Indian economy, retail inflation eased to a four-month low of 5.22% in December. This reduction is mainly attributed to a decrease in food prices, as reported by the government on Monday. Analysts see this as an opportunity for the Reserve Bank of India (RBI) to adjust key interest rates favorably in future reviews.

The Consumer Price Index (CPI), which tracks inflation, showed a decrease for the second consecutive month after surpassing the RBI's tolerance level of 6% in October. Despite the drop, experts caution that the pace of decline was slower than projected.

Forecasts suggest potential interest rate cuts in the upcoming monetary policy review, potentially encouraging economic growth. However, experts note that fiscal factors surrounding the Union Budget may also influence the RBI's decisions in the near term.

(With inputs from agencies.)