India's Retail Inflation Eases To 7.04% In May 2022

India's retail inflation, measured by the Consumer Price Index or CPI eased to 7.04% in the month of May from 7.79% recorded in April, according to the data released on Monday by the statistics ministry. Earlier Finance Minister Nirmala Sitharaman slashed excise duty on May 21 on petrol by Rs 8 per litre and Rs 6 per litre on diesel to keep inflation under control.

According to DRE. Reddy, CEO and Managing Partner at CRCL LLP, "The central bank had revised the inflation projection for FY23 in its monetary policy earlier in the month to 6.7% from 5.7% earlier. The CPI inflation has remained above the 6% level for 5 months since January. High food, vegetable, and edible oil kept the inflation upwards. Going forward, the elevated crude prices and favorable distribution of monsoon will help ease pressure on inflation. Commodity costs have been on the rise since the middle of 2021, leaving enterprises with no choice but to pass on the high price to end consumers. Policy outcome from the US Fed, inflation levels will guide the RBI policy going forward."

Earlier, State Bank of India expected that inflation would remain well above the 7% mark till September.

According to Raghvendra Nath, Managing Director of Ladderup Wealth Management Private Ltd, "Inflation was going to stay outside RBI's comfort zone as food and other commodity prices have continued to stay up. The reason behind inflation coming down to 7.04% from 7.79% m-o-m, was just due to a favourable base effect and the recent excise cuts on petrol. While a normal monsoon is expected this season, we may see some easing in the food prices in the months to come."

Meanwhile, according to a Reuters poll, India's retail inflation expected to slip modestly for the month of May but remained above the Reserve Bank of India's upper tolerance limit for the fifth successive month as reduced fuel prices counterbalanced the rising food prices.

However, the decline is likely to be temporary and experts feel the RBI may continue to increase interest rates.

The decline in CPI inflation for May is expected but global cues look bothersome as the United States of America May CPI surged 8.6% in May which is the highest rise since December 1981. Rising food, gas, and energy prices led to the rise.

For the month of April, the CPI inflation was recorded at 7.79% (nearly 8 year high) due to various factors like surging food prices and fuel costs.

For March 2022, Inflation based on CPI index was recorded at 6.95%.