India's retail inflation has moderated in May. (PTI Photo)
New Delhi: With gradual easing of food prices, India's retail inflation, measured by consumer price index (CPI), cooled modestly to 7.04 per cent in May from near-eight-year high of 7.79 in April, data released by the Ministry of Statistics and Programme Implementation showed on Monday.
As per the data, food inflation accounts for nearly half the CPI basket. "The Consumer Food Price Inflation (CFPI) came in at 7.97 per cent in May compared with 8.09 per cent in April. Similarly, the prices of cereals, meat, fish, vegetables, pulses, fuel and light among others in May also cooled down to some extent," the ministry data showed.
However, the May inflation is still worrisome for the consumers as it stayed well above the Reserve Bank of India's (RBI's) upper tolerance limit (2-6 per cent) for a fifth consecutive month. Experts, however, predict that the marginal fall in inflation in May could be a favourable base effect but it is unlikely to do much to slow down RBI's rate hike cycle.
Last week, the six-member MPC unanimously voted to increase the benchmark policy rate by 50 basis points to take the repo rate to 4.9 per cent. Besides, the inflation projection for the year has been raised to 6.7 per cent. The MPC noted that inflation is likely to remain above the upper tolerance band of 6 per cent through the first three quarters of FY23.
Analysts, however, feel that with the sustained elevation of crude prices as well as food prices, the inflationary pressures will continue for some time unless there is some favourable conditions like monsoon. The Indian crude basket, despite having a larger share of Russian supplies, has touched a 10-year high of $121 a barrel. Globally, benchmark crude was still above $118 a barrel, with many expecting sustained levels of $110 plus in the months to come.
"India’s consumer inflation moderated to 7 per cent supported by the government measures undertaken to curb domestic fuel and food prices in May 2022. In the coming months, the spill-overs from global commodity and food prices would continue to add stress to domestic prices," said Vivek Rathi, Director-Research Knight Frank India, adding "We thus, do not see India’s inflation cooling down in the near term and in such a scenario maintaining the strength of domestic demand will be crucial from policy perspective,".
"The CPI inflation has remained above the 6 per cent level for 5 months since January. High food, vegetable, and edible oil kept the inflation upwards. Going forward, the elevated crude prices and favorable distribution of monsoon may help ease pressure on inflation. Commodity costs have been on the rise since the middle of 2021, leaving enterprises with no choice but to pass on the high price to end consumers," said DRE Reddy, CEO and Managing Partner, CRCL LLP.