Retail inflation dips to 2-yr low of 4.3 pc in May

New Delhi: India's consumer price index (CPI)-based inflation fell to 4.35% year-on-year in May 2023 from 4.70% in the previous month mainly on the back of softening food and fuel prices, government data said.

As per data released by the Ministry of Statistics & Programme Implementation (MoSPI), food inflation declined sharply to 2.91% during May as compared to 3.84% in April.

Retail inflation was 7.04% in May 2022, while food inflation during the same period had stayed firm at 7.97%.

"The headline CPI inflation may rise mildly to 4.5-4.7% in June 2023 from 4.3% in May 2023, based on the early uptrend in the prices of most of the food items, barring edible oils. Nevertheless, the average CPI print for Q1 FY2024 is likely to come in at 4.5%, marginally lower than the MPC’s revised projection of 4.6% for that quarter," said ICRA Chief Economist Aditi Nayar while commenting on May inflation data.

At 4.35%, the retail inflation remains within the comfort zone of Reserve Bank of India (RBI) which is mandated to keep inflation at 4% with a margin of 2% on either side.

Amid downward trend in retail inflation, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) last week kept the policy repo rate unchanged at 6.50% bringing respite for borrowers.

The inflation data released during the day showed prices of fruits and oils dropped in May this year. Milk inflation stayed firm at 8.91%.

As per MoSPI data, fuel and light inflation eased to 4.64% in May from 5.52% in April.

"Food inflation benefitted from a sequential fall in prices of fruits and oils even as prices of eggs, meat, milk, vegetables, and pulses continued to increase partly reflecting seasonal impact too. Core inflation was broadly unchanged at 5.15% though it is likely to inch up marginally over next few prints," said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities. (UNI)