CPI and IIP Data Out: Inflation Eased to 4.31% in January 2025

India’s inflation trends for January 2025 reveal a mixed picture, with headline inflation showing a notable decrease, especially in food prices, signalling some positive shifts for the economy. Alongside inflation statistics, industrial production data for December 2024 has also been released, offering insights into the performance of key sectors like mining, manufacturing, and electricity. Let’s take a deeper dive into the latest trends.

Declining Inflation: A Positive Shift

The year-on-year inflation rate for January 2025, based on the All India Consumer Price Index (CPI), is reported at 4.31%, a provisional figure that represents a decrease from the previous month’s inflation rate. Notably, this marks the lowest inflation since August 2024. This decline of 91 basis points from December 2024 is a welcome sign that inflationary pressures may be easing. The dip in inflation is largely attributed to declines in the prices of vegetables, eggs, pulses, cereals, clothing, and even health services.

Food Inflation: A Significant Drop

The Consumer Food Price Index (CFPI) for January 2025 shows a food inflation rate of 6.02%, indicating a year-on-year increase in food prices compared to January 2024. However, the good news is that food inflation has dropped sharply by 237 basis points compared to December 2024, making January 2025 the month with the lowest food inflation since August 2024. This drop is seen across both rural and urban sectors, though rural areas still experienced higher food inflation at 6.31% compared to the urban sector at 5.53%.

Rural vs. Urban Inflation

• Rural inflation showed a significant decline in both headline inflation and food inflation. In January 2025, headline inflation in rural areas stood at 4.64%, down from 5.76% in December 2024. The rural food inflation also dropped from 8.65% in December to 6.31% in January, reflecting the easing of pressures on essential goods in these regions.
• Urban inflation, too, experienced a notable decrease, with headline inflation falling from 4.58% in December 2024 to 3.87% in January 2025. Similarly, urban food inflation decreased from 7.9% in December 2024 to 5.53% in January 2025. These trends suggest that urban consumers are also benefiting from lower prices on food and essential items.

Sectoral Inflation Breakdown

• Housing inflation for January 2025 is recorded at 2.76%, slightly higher than the 2.71% of December 2024. This index is applicable to urban areas only, reflecting modest increases in housing-related costs.
• Education inflation showed a slight decrease, from 3.95% in December 2024 to 3.83% in January 2025. This combined figure for rural and urban areas signals that the rising cost of education might be stabilizing.
• Health inflation, which stood at 4.05% in December 2024, dropped to 3.97% in January 2025, offering some relief to consumers in the healthcare sector.
• Transport and communication inflation increased marginally from 2.64% in December 2024 to 2.76% in January 2025, signalling slight upward pressure in transportation and communication services.
• Fuel and light inflation remain negative, at -1.38% in January 2025, a small increase from -1.33% in December 2024, continuing the trend of lower fuel prices.

Index of Industrial Production (IIP Data): Growth Continues

On the industrial front, India’s Index of Industrial Production (IIP) for December 2024 shows a growth rate of 3.2%, slightly lower than the 5.2% recorded in November 2024. Despite this slowdown, the performance of specific sectors is worth noting.

• Mining sector saw a growth of 2.6% in December 2024, reflecting steady demand for mineral extraction.
• Manufacturing grew by 3.0%, with 16 out of 23 industry groups showing positive growth. The manufacturing of basic metals (up 6.7%), electrical equipment (up 40.1%), and coke and refined petroleum products (up 3.9%) were among the key contributors to this growth.
• Electricity production showed the highest growth, at 6.2%, indicating robust demand for energy across the country.

The Quick Estimate of IIP for December 2024 stands at 157.2, up from 152.3 in December 2023, indicating year-on-year growth in industrial production.

Conclusion 

While India’s inflationary pressures appear to be easing, with notable drops in food inflation, the industrial sector remains resilient, showing positive growth. These trends offer a cautiously optimistic outlook for the Indian economy as we head into 2025.

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