Retail Inflation In May Eases To 2-Year Low Of 4.25% Amid Softening Food, Fuel Prices

Retail inflation in India eased to more than 2-years low of 4.25% in May as against 4.70% in April amid softening prices of food and fuel items, according to data issued by Ministry of Statistics on June 12, 2023.

This is the fourth straight month when retail inflation has fallen and the third month in a row that Consumer Price Index (CPI) based inflation remained within the RBI's comfort zone of below 6%, according to a PTI report.

According to Nish Bhatt, Founder & CEO, Millwood Kane International said, "The slew of positive developments continues for India. After a robust growth rate, status-quo of the MPC. We now have the retail inflation cooling to a 25-month low. Food and fuel price inflation cooling has primarily led to a fall in the headline figure. The core inflation too cooled off to a 5% level."

On the industrial production front, it is better than expected at 4.2%, most components contributed to it - Mining, manufacturing, infra goods and consumer non-durables. This data set is encouraging, and will help the central stay on an extended pause for longer than envisaged earlier. A good monsoon year and stability in crude prices will guide the economic data going forward, added Nish Bhatt.

Meanwhile, Mohit Ralhan, Chief Executive Officer TIW Capital said, "At 4.25%, inflation continued to remain on a downward trajectory, reaching a 25-month low, driven by the decline in consumer food price inflation from 3.8% in April to 2.9% in May. A decline in oils & fats, vegetables, meat & fish prices more than offset any increase from cereals and spices. Fuel inflation also declined from 5.5% to 4.6% YoY."

At 4.25%, retail inflation in India is the lowest since April 2021 when it was 4.23%.

The government has tasked the central bank to ensure retail inflation remains at 4% with a margin of 2% on either side, added the PTI report.

Inflation for the food basket was at 2.91% in May, lower than 3.84% in April. The food basket accounts for nearly half of the CPI.

Inflation in fuel and light eased to 4.64%, from 5.52% in April, stated the PTI report.