Retail inflation falls to 4.75% in May, a one-year low

The Uncut

New Delhi. Retail inflation fell to a one-year low of 4.75 percent in May due to a slight decrease in the prices of food products and remained within the satisfactory range of the Reserve Bank of India. According to official data released on Wednesday, the trend of decline in retail inflation based on the Consumer Price Index (CPI) since January continued in May as well.

Retail inflation stood at 4.83 per cent in April, while in May, 2023 it stood at 4.31 per cent, which is its previous low.
According to data released by the National Statistical Office (NSO), the inflation rate of food items stood at 8.69 percent in May, which is slightly lower than 8.70 percent in April. Core inflation has seen a gradual decline since January 2024. It was 5.1 percent in February and declined from there to 4.8 percent in April.

Data shows that the all-India inflation based on CPI is the lowest in May 2024 after a year ago, when it was 4.31 percent. It has remained below six percent since September 2023. During May, vegetable prices were higher than in April, while the situation was the opposite in the case of fruits. The government has entrusted the Reserve Bank with the responsibility of limiting retail inflation to four percent with a variation of two percent. Keeping this retail inflation in mind, the Reserve Bank takes a decision on the policy interest rates.

In its bi-monthly monetary review in early June, the Reserve Bank has projected retail inflation to be 4.5 percent for the current financial year. It is expected to be 4.9 percent in the first quarter, 3.8 percent in the second quarter, 4.6 percent in the third quarter and 4.5 percent in the fourth quarter. Aditi Nair, chief economist of rating agency ICRA, said on the retail inflation data that inflation of food and beverages will come down somewhat in June compared to May, while other sub-groups will remain above seven percent.

Nair said, “This will help in keeping the core retail inflation below five per cent in June 2024. After this, retail inflation is expected to come down sharply to 2.5-3.5 per cent in July and August due to a favorable base.” NSO data also shows that retail inflation stood at 5.28 per cent in rural areas, while it stood at 4.15 per cent in urban areas.

At the state level, inflation was higher than the national level of 4.75 percent in Andhra Pradesh, Assam, Bihar, Chhattisgarh, Haryana, Karnataka, Kerala, Odisha, Rajasthan, Tamil Nadu, Telangana and Uttar Pradesh. It was the highest in Odisha at 6.25 percent while the lowest inflation of 1.99 percent was recorded in Delhi. The NSO collects data on prices from 1,114 selected urban markets and 1,181 villages covering all states and union territories on a weekly basis. In May, the NSO collected prices from 100 villages and 98.5 percent urban markets.

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