India's inflation slows to lower-than-expected 5.22% in December, boosting case for rate cuts
India's inflation declined for a second straight month year on year, coming in just below expectations at 5.22% in December, boosting the case for prospective interest rate cuts.
Analysts polled by Reuters had forecast a 5.30% reading. The December print from the Ministry of Statistics and Programme Implementation marked the slowest pace of growth in prices since August 2024.
In October, the country's inflation rate had hit a 14-month high of 6.21%, breaching the 6% tolerance limit of the Reserve Bank of India. Reserve Bank of India Governor Sanjay Malhotra on Dec. 24 forecast an inflation rate of 4.8% for the fiscal year ending March 2025.
Annual growth in food prices — a key metric — eased to 8.39% in December from 9.04% in November, with the MoSPI noting a "significant decline" in inflation in vegetables, sugar, cereals and confectionary, among others. Overall inflation for vegetables slipped to 26.56% in December, a step down from the 29.33% of November but a plunge compared with the October print of 42.18%. Despite this, prices for peas, potatoes and garlic observed the three highest year-on-year hikes last month.
Agriculture is a major component of India's GDP, and Malhotra previously wrote that pressures in the food sector were likely to linger in the fiscal third quarter, before starting to ease in the fourth one. This will be due to a seasonal correction in vegetable prices and monsoon harvest arrivals, as well as a likely good output for winter crops and adequate cereal buffer stocks.
The softer inflation reading for December offers more room to the RBI to cut rates, amid slowing growth in the country. India's economy expanded by just 5.4% in its second fiscal quarter ending September, well below estimates by