India’s inflation is expected to average around 4.8 per cent in 2025, according to a report by Centrum Institutional Research.
The report highlights that the recent decline in consumer price inflation (CPI) for January could create room for the Reserve Bank of India (RBI) to implement another 25 basis points (bps) rate cut in the near future.
The report suggests that inflation has slowed significantly, largely due to a drop in food prices, particularly vegetables. As fresh supplies of vegetables and pulses reach markets, inflationary pressures are likely to ease further, bringing the overall average inflation to 4.8 per cent for the financial year 2025.
The latest data shows that retail CPI in January cooled to 4.3 per cent, down from 5.2 per cent in December 2024. This decline was primarily driven by a sharp drop of 237 bps in food prices.
Year-on-year, food and beverages (F&B) inflation also slowed from 7.7 per cent in December to 5.7 per cent in January. The fall in vegetable prices has played a crucial role in easing overall inflation.
With inflationary concerns subsiding for now, the RBI has greater flexibility to focus on economic growth. However, the report also warns that the depreciating rupee needs to be closely monitored, as it could have an impact on domestic inflation trends.
The Monetary Policy Committee (MPC) recently decided to maintain a “Neutral” stance, indicating that future rate cuts will depend on macroeconomic data. If inflation remains under control, there is a possibility that the RBI may consider another 25 bps rate cut to support economic activity.
The Indian economy has been witnessing a phase of stable inflation after months of volatility, mainly caused by fluctuations in food prices. A continued decline in inflation could provide a more favourable environment for policy adjustments aimed at stimulating economic growth.
Experts believe that if the downward trend in food inflation continues, it will provide significant relief to households and strengthen consumer demand. Additionally, lower inflation will help businesses manage input costs better, contributing to a more stable economic outlook.
However, risks remain, including global economic uncertainties and currency fluctuations, which could influence future inflation trends. The RBI is expected to keep a close watch on these factors before making further monetary policy decisions.