Inflation Eases To 4.75% In May 2024, CPI Below RBI's Upper Tolerance Limit For 9-Consecutive Month

India's Consumer Price Index (CPI) inflation came in at 4.75% (Provisional) for the month of May, 2024, which has eased for the fifth consecutive month. Notably, the retail inflation has also stayed below RBI's tolerance for the ninth month in a row.

CPI was at 4.83% in the previous month, and at 4.31% in May 2023.

As per the Ministry of Statistics & Programme Implementation data, the CPI inflation in May 2024 eased despite a slower pace of drop in food prices. Meanwhile, in May, the inflation rate of rural and urban is 5.28% and 4.15%, respectively.

Consumer food price index (CFPI) was at 8.69% in May 2024, as compared to 8.70% in April 2024. However, it is sharply up from 2.96% in May 2023.

Food and beverages inflation rate stood at 7.87%, while Pan, tobacco and intoxicants rate was at 3.03%. Also, inflation rate of 2.74% was seen in clothing and footwear, as for the housing inflation stood at 2.56%. Fuel and light witnessed deflation of 3.83%.

As per Trading Economics data, Inflation Rate in India decreased to 4.75 percent in May from 4.83 percent in April of 2024. Inflation Rate in India averaged 5.97 percent from 2012 until 2024, reaching an all time high of 12.17 percent in November of 2013 and a record low of 1.54 percent in June of 2017.

In the latest policy, RBI maintained status quo for the eighth time in a row with repo rate at 6.50% with inflation target unchanged at 4.5% in FY25.

In its June 2024 policy, RBI said, Headline inflation has seen sequential moderation since February 2024, albeit in a narrow range from 5.1 per cent in February to 4.8 per cent in April 2024. Food inflation, however, remains elevated due to persistence of inflation pressures in vegetables, pulses, cereals, and spices. Deflation in fuel prices deepened during March-April, reflecting the cut in liquified petroleum gas (LPG) prices. Core (CPI excluding food and fuel) inflation eased further to 3.2 per cent in April, the lowest in the current CPI series, with core services inflation also falling to historic lows.

Looking ahead, RBI added, overlapping shocks engendered by rising incidence of adverse climate events impart considerable uncertainty to the food inflation trajectory. Market arrivals of key rabi crops, particularly pulses and vegetables, need to be closely monitored in view of the recent sharp upturn in prices. Normal monsoon, however, could lead to softening of food inflation pressures over the course of the year. Pressure from input costs have started to edge up and early results from enterprises surveyed by the Reserve Bank expect selling prices to remain firm. Volatility in crude oil prices and financial markets along with firming up of non-energy commodity prices pose upside risks to inflation.

Taking into account these factors, RBI has forecasted CPI inflation for 2024-25 at 4.5 per cent with Q1 at 4.9 per cent; Q2 at 3.8 per cent; Q3 at 4.6 per cent; and Q4 at 4.5 per cent.