Retail inflation accelerated to 3.93 per cent in May as food prices firmed up and transport costs rose, adding to concerns over monsoon uncertainty, elevated crude oil prices and the conflict in West Asia
India’s retail inflation rose to 3.93 per cent in May from 3.48 per cent in April, according to provisional data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday. The latest reading brings inflation close to the Reserve Bank of India’s (RBI) medium-term target of 4 per cent and marks the highest level in five months under the revised Consumer Price Index (CPI) series.
The May print extends the steady rise in headline inflation seen since January, when the rebased CPI series was introduced with 2024 as the base year. Retail inflation stood at 2.74 per cent in January, 3.21 per cent in February, 3.4 per cent in March and 3.48 per cent in April.
On a sequential basis, consumer prices increased 0.75 per cent in May, the sharpest month-on-month rise in 16 months, indicating that price pressures are becoming more broad-based.
“The sub-4 per cent headline and core inflation points towards comfortable trends in the near term. While the softening crude oil prices and cap on weakening Rupee remain a tailwind we continue to monitor the impact of adverse monsoons on food inflation. For now, we continue to expect 50bps of rate hike beginning in October,” said Chief Economist, Kotak Mahindra Bank, Upasna Bhardwaj.
Food Prices Lead Rise
Food inflation remained the biggest contributor to the increase in headline inflation. Consumer food inflation accelerated to 4.78 per cent in May from 4.2 per cent in April, while inflation in the food and beverages category stood at 4.55 per cent.
Price pressures were more pronounced in rural areas, where food inflation stood at 4.85 per cent compared with 4.66 per cent in urban centres. Headline rural inflation was recorded at 4.25 per cent, higher than the 3.53 per cent reported for urban India.
Within the food basket, tomato prices continued to surge, with inflation rising to 48.43 per cent in May from 35.26 per cent in April. Ginger inflation stood at 32.49 per cent. Some agricultural commodities, however, continued to provide relief. Potato prices declined 23.71 per cent year-on-year, while peas registered a contraction of 11.47 per cent.
The data suggest that perishables remained the principal source of inflationary pressure during the month.
“India’s May 2026 CPI inflation print of 3.93 per cent is broadly in line with expectations, but the rise in food inflation to 4.78 per cent underscores persistent price pressures in perishables, particularly tomatoes, ginger and other vegetables,” said Rajeev Sharan, Head, Research, Brickwork Ratings.
Food-related cost pressures also spilled over into services. Inflation in food and beverage serving services stood at 5.77 per cent, while restaurants and accommodation services recorded inflation of 5.75 per cent.
Transport And Gold Add Pressure
Transport-related inflation showed signs of strengthening amid elevated crude oil prices and supply disruptions linked to the conflict in West Asia. Inflation in transport services for goods rose 7.63 per cent year-on-year, while the cost of operating personal transport equipment increased 3.06 per cent. Overall transport and communication inflation stood at 1.75 per cent.
Among non-food categories, precious metals remained a significant source of inflationary pressure. Inflation in other personal effects, which includes jewellery and precious metals, surged 56.35 per cent.
Silver jewellery emerged as the fastest-rising item in the CPI basket, with inflation soaring 155.23 per cent during the month. As a result, inflation in the personal care and miscellaneous category climbed to 18.46 per cent.
Core services inflation remained relatively firm. Higher education costs rose 3.64 per cent, while education services inflation stood at 2.99 per cent. Healthcare inflation was recorded at 1.49 per cent.
Housing inflation remained moderate at 2.12 per cent. Rural housing inflation stood at 2.73 per cent, while urban housing inflation was recorded at 1.91 per cent. Inflation in housing, water, electricity, gas and other fuels stood at 1.73 per cent.
RBI Outlook Turns Cautious
The inflation trajectory comes amid growing concerns over rising crude oil prices and weather-related risks. Although inflation remains within the RBI’s tolerance band of 2 per cent to 6 per cent, economists have cautioned that higher fuel costs, supply disruptions and a weaker-than-normal monsoon could push prices higher in the coming months.
In its June monetary policy review, the RBI raised its inflation forecast for FY27 to 5.1 per cent from 4.6 per cent projected earlier. The central bank cited risks arising from El Niño conditions and elevated energy prices.
The RBI expects inflation to average 4.2 per cent in the first quarter of FY27, rise to 5.1 per cent in the second quarter, peak at 5.9 per cent in the third quarter and ease marginally to 5.4 per cent in the final quarter.
“While a build-up in price pressures is being watched closely against the backdrop of the ongoing West Asia conflict, India’s inflation is at still below the mid-range of the 2-6 per cent target, and thereby less of an immediate policy concern. This is consistent with the central bank’s view that current inflation readings remain manageable. However, policymakers continue to closely monitor upcoming inflation prints as higher input costs gradually filter through from downstream industries to consumers, weather-related risks unfold, and the progress of the monsoon season becomes clearer,” said Senior Economist & Executive Director, DBS Bank, Radhika Rao.
On 5 June, the six-member Monetary Policy Committee unanimously voted to keep the benchmark repo rate unchanged at 5.25 per cent while retaining its neutral policy stance.
The prolonged conflict in West Asia has added to inflation concerns by increasing the risk of higher imported energy costs and supply-chain disruptions. The RBI has warned that continued geopolitical uncertainty poses risks to both inflation and growth.
Despite these headwinds, India’s economy has remained resilient. Gross domestic product growth stood at 7.8 per cent in the March quarter, taking FY26 growth to 7.7 per cent.
State-wise Inflation Trends
Inflation trends remained uneven across states and Union Territories, with Telangana recorded the highest inflation rate among regions with a population exceeding five million at 6.15 per cent, followed by Tamil Nadu at 5.11 per cent, Puducherry at 5 per cent and Andhra Pradesh at 4.9 per cent.
Karnataka and Odisha also remained above the national average, recording inflation rates of 4.59 per cent and 4.54 per cent respectively. At the other end of the spectrum, Delhi reported inflation of 2.5 per cent, while Tripura recorded the lowest inflation rate at 2.02 per cent.
The May inflation print suggests that food prices remain the dominant driver of headline inflation, even as underlying demand conditions remain relatively contained. According to Sharan, core inflation remained around 3.7 per cent, indicating that price pressures are still being driven more by food inflation and imported energy costs than by broad-based demand.
“Geopolitical tensions and higher crude oil prices likely added to transport, logistics and input costs, while moderation in several other categories helped prevent a sharper spike. Overall, May’s print reflects a gentle reacceleration in inflation, shaped by both weather related food volatility and imported cost pressures, even as core categories continue to provide an anchor,” Sharan said.
