India's Inflation Set to Align with RBI's Target Amid Favorable Conditions

A Bank of Baroda report indicates India's inflation may soon align with the RBI's 4% target due to seasonal declines in food prices and better supply management. Lower-than-expected inflation provides monetary relief amidst global uncertainties, with core inflation remaining stable despite skewed demand recovery in some sectors.

India's inflation outlook is showing signs of improvement, potentially aligning with the Reserve Bank of India's (RBI) 4% target in the months ahead, according to a recent report by Bank of Baroda. This optimistic perspective is attributed to a seasonal decrease in food prices, especially in vegetables, and enhanced supply management strategies that have helped reduce the Consumer Price Index (CPI) inflation rate.

The report emphasized that if the volatility in CPI, particularly vegetable inflation, continues to trend favorably, meeting the inflation target is realistic. The January CPI headline inflation benefited from seasonal food price corrections, with measures to ensure the supply of essential goods playing a significant role in curbing inflationary pressures.

In the context of global policy uncertainty, lower-than-expected inflation figures offer reassurance from a monetary policy viewpoint. January's food inflation saw a decrease due to seasonal elements and favorable supply-side conditions. The report noted that high-frequency price data from February 2025 confirms ongoing price moderation, particularly in tomatoes and potatoes, which have experienced significant price drops.

Moreover, core inflation remains unaffected, with price pressures outside the food and fuel sectors holding steady. The financial outcomes of companies suggest a skewed demand recovery, with robust growth in only selected segments, indicating that core inflation will likely remain under control.

Overall, the easing of CPI inflation is viewed positively for monetary policy, especially amid global economic uncertainties. Nevertheless, elements such as currency volatility, liquidity dynamics, and potential shifts in global monetary policies continue to present challenges.

Despite these challenges, the stabilization of food prices and the steadiness of core inflation paint a promising picture for India's inflation trajectory. (ANI)

(With inputs from agencies.)