Synopsis
New Delhi, Feb 5 (NationPress) Driven by decreased vegetable prices, particularly tomatoes, onions, and potatoes, the CPI inflation is projected to be within the 4.5% to 4.7% range for January, according to the Bank of Baroda’s ECI.Key Takeaways
- Vegetable prices are declining, influencing CPI.
- CPI inflation expected between 4.5% and 4.7%.
- Global edible oil prices have softened.
- Domestic production of pulses and wheat is increasing.
- Budget measures aim to stabilize food prices.
New Delhi, Feb 5 (NationPress) Driven by a reduction in vegetable prices, particularly with tomato, onion, and potato prices plummeting, the Consumer Price Index (CPI) inflation is projected to fall within the 4.5 percent to 4.7 percent range for January, according to the Bank of Baroda’s Essential Commodity Index (ECI) released on Wednesday.
The Index demonstrated a continued downward trend in January, decreasing to 4 percent on a year-on-year basis, down from 5.4 percent in December.
In terms of sequential data, the index saw a sharp decline of 2.4 percent, following a 0.5 percent decrease in December.
“The prices of edible oils have also fallen. Therefore, we anticipate a considerable reduction in headline CPI for January. CPI inflation is expected to be in the 4.5-4.7 percent range,” the report stated.
The outlook for inflation is developing generally in accordance with forecasts, significantly aided by the drop in vegetable prices.
Moreover, global prices for edible oils have decreased, which is favorable for the domestic inflation trend. The likelihood of increased production due to improvements in the sowing of pulses (up by 2.3 percent) and wheat (up by 2.8 percent) during the current rabi season is promising for the domestic supply of these crops.
Recent budget announcements aimed at alleviating supply-side challenges concerning oilseeds, pulses, and fruits and vegetables are expected to help prevent sporadic food-price surges that can disrupt inflation outcomes, according to the BoB Index.
“The inflation outlook appears increasingly stable, driven by a widespread softening of underlying price pressures,” remarked economist Aditi Gupta.
Vegetable prices that previously contributed to a steep rise in food inflation are now undergoing a seasonal correction due to consistent arrivals.
Even for cereals like pulses and rice, the moderation in prices has persisted due to elevated domestic production.
“Consequently, we anticipate that the inflation trajectory will evolve largely in line with expectations, possibly showing a downward trend. This, along with a significant improvement in domestic liquidity conditions, is likely to provide the RBI with the flexibility to lower rates during their meeting this week,” Gupta added.
