India’s May Retail Inflation Edges Up to 3.93%

New Delhi:  Driven by an uptick in the prices of essential food items, India’s retail inflation based on the Consumer Price Index (CPI) accelerated to 3.93% in May. According to official data released on Friday by the Ministry of Statistics and Programme Implementation (MoSPI), the headline inflation number showed a noticeable jump from the 3.48% recorded in the preceding month of April.  

The primary driver behind this acceleration was the food basket. Consumer Food Price Index (CFPI)-based food inflation climbed significantly to 4.78% in May, up from 4.20% in April, squeezing household budgets. Government data highlighted that precious metal jewellery, along with staple vegetables and ingredients like tomatoes, ginger, and raisins, faced the highest inflationary pressures during the month. Conversely, items like potatoes, peas, and automobiles registered a lower rate of price growth.  

Despite the month-on-month acceleration, the headline figure remains marginally below the Reserve Bank of India's (RBI) medium-term target of 4.0%. However, it sits well within the central bank's broader comfort zone of 2.0% to 6.0%. Just last week, during its monetary policy review, the RBI maintained a cautious stance by holding interest rates steady.

The central bank also revised its inflation projection for the current fiscal year upward to 5.1% from an earlier estimate of 4.6%, citing risks from mounting global energy costs, fuel price adjustments, and unpredictable monsoon trends linked to West Asia geopolitical disruptions.

The latest inflation dataset uses 2024 as the recalculated base year, a shift introduced earlier this year to reduce index volatility by reflecting modern consumer spending habits more accurately. Economists warn that persistent heatwaves and elevated fuel prices could keep core inflation sticky in the coming months.