INSUBCONTINENT EXCLUSIVE:
NEW DELHI: The annual retail inflation eased to a two-year low of 4.25% in May from 4.7% the previous month, government data showed on
It is for the third month in a row that Consumer Price Index (CPI) based inflation remained within the RBI's comfort zone of under 6%.The
inflation has fallen to a 25-month low mainly due to the easing of food prices such as cereals and vegetables as well as lower energy prices
The consumer food price index (CFPI), which accounts for nearly half of the overall consumer price basket, eased to 2.91 per cent in May
from 3.84 per cent in April
Rural inflation stood at 4.17 per cent while urban inflation stood at 4.27 per cent
The retail inflation based on Consumer Price Index (CPI) was 7.04% in May 2022, in a drastic rise due to Russia's invasion of
Ukraine.Meanwhile, industrial output rose 4.2% in April 2023 against 6.7% a year ago, data showed.The figures come a week after RBI kept its
key lending rate steady for a second straight meeting and signalled monetary conditions would remain tight until inflation falls towards 4%
on a sustainable basis.India's retail inflation was last below 4% in September 2019.Economists say strong inflation levels last year have
flattered data this year and the so-called positive base effect will now wane
Thus, after falling towards 4% in May, they expect inflation to start picking up again.Expert take"Inflation softened further in May as a
high base effect continued to pull down the prints
Food inflation continued to moderate and it was encouraging to see a seasonally adjusted sequential decline in the headline inflation as
Inflation is expected to print below 5% again in June although moving higher from Q2 onwards," said Sakshi Gupta, principal economist at
HDFC Bank, Gurugram."High base effect and lower sequential uptick in food and miscellaneous indices pulled headline retail inflation to a
While El Nino continues to be a key monitorable risk, expected pass-through of lower global commodity prices to retail prices and impending
cut in retail fuel prices are key tailwinds for inflation going forward," said Garima Kapoor, Economist, Institutional Equities, Elara
Capital, Mumbai."Rural and urban inflation (were) almost the same which is quite unusual
States had a differential picture
Inflation in Bihar, Jharkhand, Kerala, Tamil Nadu, Telangana, Uttar Pradesh and Uttarakhand were above average, while Delhi and Chhattisgarh
Given the uncertainty in the monsoon, the RBI will be watchful of inflation and policy stance
We believe that the earliest time for rate action, provided inflation is in line with the RBI's estimate, would be February," Madan
Sabnavis, chief economist, Bank of Baroda, Mumbai
"The CPI inflation print for May eased to a softer than expected 20-month low of 4.3%, as against our expectation of 4.6% for the month,
with the positive surprise chiefly driven by the food and beverages segment
Nevertheless, concerns loom on the horizon regarding the potential impact of a sub-par monsoon on food inflation in the second half of this
A pivot to rate cuts is quite distant
ICRA expects an extended pause through FY2024, and the stance to remain unchanged over the next couple of policy meetings," Rahul Agarwal,
senior economist, ICRA Limited, Mumbai."The May print will prove to be a point of 'local minimum' in the current inflation cycle, with
subsequent inflation readings moving somewhat higher to remain in the range of 4.5-5.5% over FY24
With the onset of El Nino globally, we watch closely its intensity in the near term for any possible adverse impact on India's Southwest
We foresee a decisive down-move in inflation trajectory to 4.0-4.5% in FY25
As such we expect the RBI to maintain a prolonged pause on rates through the ongoing fiscal year, with a rate cutting cycle possibly
commencing in the first quarter of FY25," Yuvika Singhal, Economist, Quanteco Research, New Delhi.(With inputs from agencies)
