Retail inflation slips to 7.04% in May, stays above RBI's comfort zone for fifth month in a row

India’s retail inflation came down to 7.04% on an annual basis in May from 7.79% in April owing to easing food prices in the month of May.

The overall food inflation grew by 7.97% this month as against 8.31% last month and 5.01% in the corresponding period of last fiscal (FY22).

Sequentially, the headline inflation slowed to 0.94 per cent in May from 1.43 per cent in April.

The CPI-based inflation has breached the upper limit of RBI’s tolerance band, ranging from 2-6%, for the fifth consecutive month.

However, with the rising crude oil prices and supply-chain disruptions caused by the Russia-Ukraine war, the effect is anticipated to be short-lived.



Rising prices of vegetables are a cause for concern. They rose 18.26 per cent for May over the same period last year. The sequential rise has been at over 5%.

Fuel and light inflation climbed 9.54 per cent in May compared to same period last year. Sequentially, fuel and light inflation slowed to 1.4 per cent in May from 3.1 per cent in April.

The number comes a few days after the RBI revised India's inflation projection to 6.7% from the earlier estimate of 5.7% in the Monetary Policy Committee’s (MPC) June meeting based on the increase in commodity prices globally.

These factors, along with an average crude oil price (Indian basket) of US$105 per barrel and a normal monsoon in 2022, lead to inflation estimates of 6.7% in 2022-23, with Q1 at 7.5%; Q2 at 7.4%; Q3 at 6.2%; and Q4 at 5.8%.

The government is eager to assist with inflation management in order to keep monetary tightening to a minimum, as a sudden increase in interest rates might derail the economic recovery.