India’s retail inflation eased to a 12-month low of 4.75 per cent on an annual basis in May as against 11-month low of 4.83 per cent in the previous month, showed the government data on Wednesday
The number has remained within the Reserve Bank of India’s (RBI) tolerance band of 2-6 per cent.
Sequentially, the inflation rate remained unchanged at 0.48 per cent in May.
The food inflation rate in May eased to 8.62 per cent from 8.75 per cent in April. However, it has remained higher than the 3.3 per cent registered in May 2023.
The rural inflation dipped to 5.28 per cent in May from 5.43 per cent. Meanwhile, urban inflation rate stood at 4.15 per cent in May.
Inflation rate for India’s staples
The inflation rate for vegetables moderated marginally to 27.3 per cent on a yearly basis as against 27.8 per cent in April.
For cereals and pulses, which constitute a significant portion of India’s staple diet, the inflation rate came in at 8.69 per cent and 17.14 per cent respectively.
The Fuel and light inflation rate for May contracted to 3.83 per cent as against a contraction of 4.24 per cent in April.
For clothing & footwear and housing sectors the inflation rates were 2.74 per cent and 2.56 per cent, respectively.
Elephant returning to the woods
While unveiling the outcomes of the June Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) Governor Shaktikanta Das asserted that India’s inflation is reaching its target of 4 per cent.
However, he clearly stated that the central bank wants the process to be gradual and take place on a durable basis.
Das had characterised inflation as an elephant and had said that it is returning to the woods very slowly during the June meet.
The RBI left the inflation aim for fiscal 2025 unchanged at 4.5 per cent. Inflation for fiscal 2024 stood at 5.4 per cent, at par with the central bank’s forecast.
The central bank now sees inflation for Q1, Q2, Q3 and Q4 of this fiscal year at 4.9 per cent, 3.8 per cent, 4.6 per cent and 4.5 per cent, respectively, with risks evenly balanced. In the April policy, the monetary authority had pegged the inflation readings at 4.9 per cent, 3.8 per cent, 4.6 per cent and 4.5 per cent respectively, assuming a normal monsoon.
The RBI Governor highlighted the downward trajectory of inflation, underpinned by favorable base effects. However, he acknowledged the persistent pressure from service prices which has sustained the key indicator at a heightened level compared to the stipulated targets.
