India’s Consumer Price Index (CPI) inflation eased to 5.48% YoY in November 2024 from 6.21% in the previous month. The decline in headline inflation was largely driven by a fall in food inflation to 8.2% YoY in November 2024 from 9.7% YoY in October 2024. However, food inflation remained broad-based, with 43% of items in the food basket witnessing inflation rates surpassing 6%.

Within food, lower contribution from vegetables drove the decline in headline inflation. Vegetable inflation dropped to 29.3% YoY in Nov’24 from 42.2% YoY in Oct, on account of a 5% MoM price correction.

Core inflation remained steady at 3.7% YoY in November 2024. Core inflation and its refined measures have bottomed out because of the revision in mobile tariffs and the increase in gold prices.

We expect inflation to average around 4.8% in FY25. The food inflation outlook appears favourable, supported by healthy kharif production and encouraging prospects for the rabi season. The RBI MPC is likely to initiate the rate-cut cycle from February 2025, as inflation is projected to gradually slide lower from current levels.

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