India’s retail inflation eases marginally to 4.75% in May

India's retail inflation dipped to a 12-month low of 4.75% in May, down slightly from April's 4.83%, according to government data released on Wednesday. The Ministry of Statistics and Programme Implementation released data on June 12, confirming that India's headline retail inflation was 4.75% in May, following a rate of 4.83% in April. In its latest policy review, the RBI maintained its FY25 inflation forecast at 4.5% but noted that food prices could remain persistently high.

In April, the Consumer Price Index (CPI) inflation was recorded at 4.83%. This headline rate has remained below 5% for three consecutive months since March 2024. The significant reduction in the headline inflation rate was primarily due to a decline of 3.83% in the fuel and light category in May. In contrast, the inflation rate for food and beverages remained unchanged at 7.87% compared to April.

"Year-on-year inflation rate based on the all-India Consumer Price Index (CPI) number is 4.75% (Provisional) for May 2024. Corresponding inflation rates for rural and urban areas are 5.28% and 4.15%, respectively," the data released by the government.

Significantly, the spices category showed a notable decline in year-on-year inflation compared to April 2024. Additionally, inflation for categories such as ‘Clothing & Footwear,’ ‘Housing,’ and ‘Miscellaneous’ has decreased since last month. The Consumer Price Food Index (CPFI) stayed nearly unchanged at 8.69% in May, compared to 8.7% recorded a month earlier.

Last Friday, RBI Governor Shaktikanta Das stated that inflation is anticipated to drop below 4% in the second quarter of 2024-25. However, this decrease is unlikely to result in a rate cut, as inflation is expected to rise again in the following quarter.

During the post-monetary policy press conference, the RBI Governor mentioned that reaching the final stretch towards the 4% inflation target is proving to be quite challenging. “When we have confidence that inflation will stick to 4% and not go up, then we will act on further monetary policy action,” Das says.

The Monetary Policy Committee (MPC) anticipates inflation to hover around 4.5% in the fiscal year 2024-25, with the first quarter at 4.9%, the second quarter at 3.8%, the third quarter at 4.6%, and the fourth quarter at 4.5%, provided the monsoon remains normal.