May retail inflation at 6-month high of 6.3% on higher food, fuel prices

Inflation, based on Consumer Price Index (CPI), has breached the Reserve Bank of India's (RBI) target range after five months.

India's retail inflation shot up to six-month high of 6.3 per cent in May, after easing to a three-month low of 4.23 per cent in April, according to the government data released on Monday.

Inflation, based on Consumer Price Index (CPI), has breached the Reserve Bank of India's (RBI) target range for the first time after five months. The RBI is mandated to maintain the crucial number at 4 per cent in the medium term, with a 2 percentrage point margin on either side as part of its inflation target.

A Reuters poll estimated the inflation rate to be 5.30 per cent in May.

Food inflation accelerated to 5.01 per cent in May, as compared to 1.96 per cent in April, while core inflation stood at 6.6 per cent.

Within the food items, the rate of fall in vegetables prices was at (-) 1.92 per cent in May, as against (-) 14.18 per cent in the previous month. Meanwhile, the inflation rate in Food and beverages was at 5.24 per cent.

Inflation in 'fuel and light' category remained elevated at 11.58 per cent during the month as against 7.91 in the previous month.

Inflation rate in edible oil and fats soared to 30.84 per cent in the Month of May as against 25.91 per cent in May. 

Meanwhile, the wholesale price-based inflation, released earlier during the day, soared to a record high of 12.94 per cent in May, on rising prices of crude oil and manufactured goods.

While there were fewer supply chain disruptions during the recent pandemic lockdowns compared with last year, a general rise in inflation globally has elevated domestic price pressures. Higher global commodity prices including including crude, edible oils and gold are clearly spilling over into consumer inflation.

The Reserve Bank, at its June month monetary policy meeting, estimated an average inflation rate of 5.1 per cent for the current financial year. The RBI is mandated to maintain the crucial number at 4 per cent in the medium term, with a 2 percentage point leeway on either side as part of its inflation target.

The Central bank in its last meeting has left the key rates unchanged and committed to maintain an accommodative stance to support growth.