New Delhi: Retail inflation based on consumer price index jumped to 5.76 per cent in May due to costlier food and fuel products. It was 5.47 per cent in April.
This means that RBI is unlikely to cut interest rates anytime soon as it focuses on bringing down inflation. In fact, food inflation rose steeply to 7.55 percent in May compared to 6.32 per cent in the previous month hitting the common man’s budget.
Vegetable prices in May increased by 11 per cent, pulses by 31.57 per cent and sugar by 14 per cent. Besides pluses other protein products, egg price went up by 9.13 per cent and meat and fish by 8.67 per cent. Spices too became costlier by 10 per cent in May.
However, the core annual consumer price inflation slowed to around 4.7 per cent in May from around 4.9 per cent in April. “The higher-than-expected uptick in CPI inflation in May 2016 has entirely been led by food items, with core inflation softening to 4.7 per cent,” said Aditi Nayar, Senior Economist at rating agency ICRA.
She said that CPI inflation is expected to be in the range of 5.5 per cent to 6 per cent in June-July 2016, with food prices likely to remain firm. “Moreover the rise in the service tax rate and retail prices of petrol and diesel would add some upward pressure to CPI inflation,” said Ms Nayar. However, she said that from August 2016 onward, food inflation is expected to soften on account of a number of factors, including a favourable base effect.
Deloitte senior economist Richa Gupta said monetary easing by RBI in the near term looks difficult especially with expectations rising of a possible rate hike by the US Fed and the effects on monsoons still unclear. “Efficient management of the food basket is likely to become crucial for any monetary easing,” she added.
