India's annual retail inflation eased to 3.17 per cent in January from 3.41 per cent in December and 5.69 per cent reported during the corresponding period last year, official data showed on Monday.

According to Consumer Price Index (CPI) data released by the Central Statistics Office (CSO), the fall in retail inflation was mainly due to a drop in the annual food inflation -- to 0.53 per cent in January from 1.37 per cent in December.

The CPI data revealed that the annual retail inflation for rural India was 3.36 per cent while that for the urban centres was 2.90 per cent. The annual food inflation was 1.07 per cent in rural areas and (-)0.31 per cent in urban.

The official data disclosed that prices of vegetable plunged by (-)15.62 per cent on a year-on-year (YoY) basis, whereas cost of pulses dropped by (-)6.62 per cent.

The prices of milk and milk-based products surged by 4.23 per cent. Other protein-based food items such as meat and fish became dearer by 2.98 per cent.

Besides, eggs became expensive by 2.64 per cent and the cost of spices rose by 5.04 per cent.

Edible oils and fats prices increased by 3.12 per cent, whereas those for sugar and confectionery edged up by 18.69 per cent on a YoY basis.

The cost of cereals and its products appreciated by 5.23 per cent, while prices of fruits were up by 5.81 per cent.

The easing of key price indices makes the context favourable for a rate cut by the Reserve Bank of India (RBI) at its next monetary policy review.

Among the states, the retail inflation was lowest in Chhattisgarh, at 0.1 per cent, followed by Odisha at 1.8 per cent, and Andhra Pradesh at 1.9 per cent. 

On the flip side, it was as high as 7 per cent in Jammu and Kashmir, 6.3 per cent in Delhi and 5.9 per cent in Himachal Pradesh.

The government target is four per cent plus-or-minus two percentage points for the next five years.