Capital Market has conducted a poll amongst economists across leading banks, rating agencies, financial advisories and brokerages for February 2025 CPI inflation projections. The results of the poll as indicated by the median of CPI inflation forecasts from economists, shows that CPI inflation would moderate to 3.9% in February 2025 from 4.3% reading in November 2024.

The economists in the poll have projected the CPI inflation in the narrow range of 3.8% to 4.1% for February 2025. The median of various CPI inflation forecast received from economists stood at 3.9%, while the average was slightly higher at 4.0% for February 2025.

CPI Inflation: January 2025

The all-India general CPI inflation declined to 4.31% in January 2025 (new base 2012=100), compared with 5.22% in December 2024. The corresponding provisional inflation rate for rural area was 4.64% and urban area 3.87% in January 2025 as against 5.76% and 4.58% in December 2024. The core CPI inflation increased to 3.74% in January 2025 compared with 3.64% in December 2024. The cumulative CPI inflation has eased to 4.87% in April-January FY2025 compared with 5.44% in April-January FY2024.

Among the CPI components, inflation of food and beverages declined to 5.68% in January 2025 from 7.69% in December 2024. Within the food items, the inflation for vegetables dipped to 11.35%, pulses and products 2.59%, egg 1.27% and cereals and products 6.24%. However, the inflation for fruits increased to 12.22%, oils and fats 15.64%, spices (-) 6.85%, non-alcoholic beverages 3.39% and milk and products 2.85%. Further, the inflation for prepared meals, snacks, sweets etc. rose to 4.07%, sugar and confectionery 0.31% and meat and fish 5.25% in January 2025.

The inflation for housing increased to 2.76%, while that for miscellaneous items rose to 4.35% in January 2025. Within the miscellaneous items, the inflation for personal care and effects increased to 10.58%, transport and communication 2.76% and household goods and services 2.86%, while the inflation for education declined to 3.83%, health 3.97% and recreation and amusement 2.64% in January 2025.

The inflation for clothing and footwear declined to 2.68%, while the CPI inflation of fuel and light eased to (-) 1.38% in January 2025.

FAO Food Price Index: February 2024

The benchmark for global food commodity prices rose in February, propelled by increases in sugar, dairy, and vegetable oil prices, according to the new Food and Agriculture Organization of the United Nations (FAO) report. The FAO Food Price Index, which tracks monthly changes in the international prices of a set of globally traded food commodities, averaged 127.1 points in February, up 1.6% from the previous month and 8.2% higher than its February 2024 level.The surge was largely driven by the FAO Sugar Price Index, which rose by 6.6% from January after three consecutive months of decline, reaching 118.5 points in February. The increase was fuelled by concerns over likely tighter global supplies for the 2024/25 season, particularly due to declining production prospects in India and adverse weather conditions affecting crops in Brazil.

The FAO Dairy Price Index increased by 4.0% from January, averaging 148.7 points. The rise was the result of higher prices across all major dairy products, including cheese and whole milk powder, as strong import demand exceeded production in key exporting regions.

The FAO Vegetable Oil Price Index averaged 156.0 points in February, up 2.0% from January and as much as 29.1% higher than a year earlier. The increase was largely the result of higher prices for palm, soy, and sunflower oils, driven by seasonal supply constraints in Southeast Asia and robust demand from the biodiesel sector.

The FAO Cereal Price Index edged up 0.7% in February, averaging 112.6 points. Wheat prices increased due to tighter supplies in the Russian Federation and concerns over crop conditions in eastern Europe and North America, though the overall index remained slightly below its February 2024 level. World maize prices continued to rise, underpinned by tightening supplies in Brazil and strong US export demand. By contrast, world rice prices fell by 6.8% in February due to ample exportable supplies and weak import demand.

The FAO Meat Price Index held steady in February, averaging 118.0 points, down marginally by 0.1% from January. While international poultry and pig meat prices eased due to abundant supplies, ovine and bovine meat prices remained firm, supported by strong global import demand.

Outlook

Headline CPI inflation moderated to five-month low of 4.3% in January 2025. The moderation in food inflation with decline in the inflation for vegetable, pulses, eggs etc led to decline in the headline inflation. However, the core inflation has shown some pick up in January 2025. The food inflation pressures, absent any supply side shock, is likely to witness softening due to good kharif production, winter-easing in vegetable prices and favourable rabi crop prospects. Core inflation is expected to rise but remain moderate. Continued uncertainty in global financial markets coupled with volatility in energy prices and adverse weather events presents upside risks to the inflation trajectory.