From tomatoes to gold, rising prices drive inflation higher in May
India’s retail inflation accelerated to 3.93 per cent in May from 3.48 per cent in April, driven primarily by rising food prices, according to official data released on Friday.
Consumer Price Index (CPI)-based food inflation climbed to 4.78 per cent in May, up from 4.2 per cent in the previous month, reflecting higher prices across several essential food categories.
Among the items recording the sharpest rise in prices were precious metal jewellery, tomato, ginger, raisin (kishmish). In contrast, potato, peas, motor cars and jeeps, cumin (jeera), and motorcycles and scooters were among the products that witnessed the lowest inflation at the all-India level during the month.
Economists attributed the uptick in inflation largely to higher food costs, particularly perishables and essential household items.
“May inflation came in slightly below consensus. Contribution from the food segments likely rose on perishables, including vegetables, edible oils, cereals, pulses, milk and related categories, not helped by heatwave conditions in some parts of the country,” said Radhika Rao, Senior Economist and Executive Director at DBS Bank.
She also noted that staggered increases in petrol prices since mid-May, along with higher CNG and commercial LPG prices, could have a broader impact on inflation in the coming months.
Housing inflation remained relatively moderate during the month. The year-on-year housing inflation rate stood at 2.12 per cent in May. Rural housing inflation was recorded at 2.73 per cent, while urban housing inflation came in at 1.91 per cent.
The inflation data assumes significance as the Reserve Bank of India primarily relies on CPI inflation while framing monetary policy. The central bank has been mandated to keep headline inflation at 4 per cent, with a tolerance band of 2 percentage points on either side.
Earlier this month, the RBI revised its inflation forecast for the current financial year upward to 5.1 per cent from 4.6 per cent. The revision was largely attributed to rising input costs and the expected impact of higher global energy prices on domestic fuel rates.
Retail fuel prices have witnessed a cumulative increase of 7.4 per cent for petrol and 8.4 per cent for diesel since May.
According to the RBI, the increase in fuel prices alone could have a direct impact of around 36 basis points on headline inflation. Combined with secondary effects across transportation and other sectors, the impact is expected to be reflected in consumer prices over the coming months.
While inflation remains within the RBI’s target range, rising food and fuel costs are likely to remain key factors influencing the country’s inflation trajectory in the near term.
For all the latest updates, download PGurus App.
