Retail inflation softens to 12-month low of 4.75% in May, food prices elevated | Key points

Consumer price index (CPI) inflation, also referred to as the retail inflation, has softened to a 12-month low of 4.75% in May 2024 on an annual basis, as per the official data released on Wednesday.

In the preceding month of April 2024, the CPI inflation stood at 4.83%.

The easing of retail inflation in May comes against the expectation of a marginal rise. A Reuters poll of economists had estimated the inflation rate to rise to 4.89% during the month.

Inflation in the fuel and light segment shrunk by 3.83% in May, as compared to a contraction of 4.24% in April. In the housing sector, inflation grew at 2.56%, whereas it stood at 2.74% in the clothing and footwear segment.

In a separate set of data, the Ministry of Statistics and Programme Implementation said the country's Index of Industrial Production (IIP) grew at 5% in April 2024, which was lowest in the last three months.

Sticky food inflation

While India's overall retail inflation softened to 4.75% in May, food inflation remained elevated at 8.69%. The latter was only marginally lower as compared to the food inflation of 8.7% in April.

Within the food basket, the vegetable inflation grew by 27.3% in May, slightly below 27.8% in the preceding month.

Pulses inflation soared by 17.14% in May, higher as compared to 16.84% in April, and cereal inflation increased to 8.69% from 8.63% in the previous month.

Inflation moderating unevenly

The RBI, in its recently issued monetary policy statement, said inflation has been "moderating unevenly", with services inflation staying elevated and slowing progress towards targets.

The central bank has a medium-term inflation target of 4%, with the tolerance band ranging from 2%-6%.

"Data released over the past few months has shown food inflation remaining elevated, even as the overall retail inflation has begun inching towards the 4% mark," it said on June 7.

"Looking ahead, 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," the RBI had stated.

The statement, however, underlined that "normal monsoon" could lead to softening of food inflation pressures over the course of the year.