India’s May Retail Inflation Edges Up to 3.93% on Higher Food and Fuel Costs

New Delhi: Driven by higher food and fuel costs, headline retail inflation in India rose in May to 3.93 per cent compared to 3.48 per cent in the preceding month. However, the outlook in the coming months continued to remain clouded by price pressures stemming from the ongoing Middle East conflict, the government said on Friday.

Despite the mounting global energy pressures from the Gulf war that triggered the rise in food prices in the country, the consumer inflation marginally inched up only and remained below the Reserve Bank of India’s medium-term target of 4 per cent.

As per the data released by the National Statistical Office (NSO), consumer price index-based inflation in the food basket was 4.78 per cent in May, higher from 4.2 per cent in April. “Precious metal jewellery, tomato, ginger, raisin (kishmish), and monaca were the five items with the highest inflation. On the other hand, potato, peas, motor car and jeep, cumin (jeera) and 'motorcycle and scooter' were the top five items with low inflation at all India combined level in May, 2026,” the NSO said.

Last week, the Reserve Bank of India (RBI) raised its inflation projection for the current fiscal to 5.1 per cent from 4.6 per cent, largely due to mounting input costs, driven by the pass-through of higher global energy prices to retail petrol and diesel prices. The central bank, mandated by the government, ensures that headline inflation remains at 4 per cent, with a 2 per cent margin on either side.

Since May this year, retail fuel prices have been raised cumulatively by 7.4 per cent for petrol and 8.4 per cent for diesel. “The increase implies a direct impact of about 36 basis points on headline inflation, which, along with second-order effects, would get reflected in consumer inflation in the coming months,” the RBI said in its monetary policy statement early this month.

Experts and analysts, however, expect that the MPC may remain data and development dependent, amid sizable risks to the growth-inflation outlook. “While we believe that the next move on rates is likely to be a hike, its timing would depend on how geopolitical and macro developments, including the severity of the El Nino, transmit to a generalisation of inflationary pressures; the October and December 2026 policy meetings could be live for potential rate hike(s), after there is some clarity on the monsoon impact,” said said Rahul Agrawal, principal economist, Icra.

“Our assessment is that headline retail inflation could breach 6 per cent at some point over the next six months. Even so, the RBI may refrain from adopting a decisively hawkish stance, provided core inflation remains anchored around 4 per cent and inflationary pressures do not become broad-based,” said Sujan Hajra, chief economist, Anand Rathi Group.