Favourable base effects and moderated food prices contribute to the decline, as inflation remains within RBI’s tolerance range.
India’s retail inflation eased to a 12-month low of 4.75 per cent in May, down from 4.83 per cent in April, according to government data. This figure remains within the Reserve Bank of India’s (RBI) tolerance band of 2-6 per cent. Sequentially, the inflation rate was unchanged at 0.48 per cent in May. Food inflation dropped to 8.62 per cent from 8.75 per cent in April but stayed higher than the 3.3 per cent in May 2023. Rural and urban inflation rates dipped to 5.28 per cent and 4.15 per cent, respectively.
Inflation rates for key staples showed mixed results where vegetable inflation moderated slightly to 27.3 per cent, cereals were at 8.69 per cent and pulses at 17.14 per cent. Fuel and light inflation contracted to 3.83 per cent. Clothing and footwear along with the housing sector saw inflation rates of 2.74 per cent and 2.56 per cent, respectively.
Shaktikanta Das, Governor, RBI noted the gradual return of inflation towards the target of 4 per cent, emphasising a durable and slow adjustment. The RBI’s fiscal 2025 inflation target remains at 4.5 per cent, with fiscal 2024 inflation at 5.4 per cent, matching the central bank’s forecast. Quarterly forecasts for this fiscal year are 4.9 per cent (Q1), 3.8 per cent (Q2), 4.6 per cent (Q3) and 4.5 per cent (Q4). Despite downward trends, service price pressures persist.
