The official CPI inflation data for May 2023 has been released. (Representative image)
The retail inflation in the food basket also eased to 2.91 per cent in May 2023, compared with 3.84 per cent in April
Continuing its downward trend for the fourth month in a row, India’s retail inflation further declined to 25-month low of 4.25 per cent in May 2023 as food prices eased, according to the official data released on Monday. Also, industrial production based on IIP rose 4.2 per cent in April 2023 as against 6.7 per cent a year ago.
At 4.25 per cent, retail inflation is the lowest since April 2021 when it was 4.23 per cent.
According to the latest data from the National Statistical Office, the retail inflation in the food basket also eased to 2.91 per cent in May 2023, compared with 3.84 per cent in April. Inflation in fuel and light eased to 4.64 per cent, from 5.52 per cent in April.
May 2023 is the third month in a row when the retail inflation remained under the RBI upper tolerance limit of 6 per cent. The CPI inflation stood at 6.44 in February 2023, 5.66 per cent in March 2023, 4.7 per cent in April 2023, and 4.25 per cent in May 2023.
Suvodeep Rakshit, senior economist at Kotak Institutional Equities, said, “May CPI inflation at 4.25 per cent was lower than expectations and benefitted from a favourable base effect as well as a further fall in food inflation. Food inflation benefitted from a sequential fall in prices of fruits and oils even as prices of eggs, meat, milk, vegetables, and pulses continued to increase partly reflecting seasonal impact too.”
He added that core inflation was broadly unchanged at 5.15 per cent though it is likely to inch up marginally over the next few prints. Overall, the RBI will see this print favourably as it remains well within its estimates.
“However, it (the RBI) will remain on an extended pause as it watches for the monsoon outturn and the impact on prices. We continue to pencil in repo rate to remain unchanged for an extended period subject to global growth prospects, central bank actions, and domestic growth prospects,” Rakshit said.
The government has tasked the central bank to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side. In the monetary policy review last week, the RBI MPC unanimously decided to keep the key repo rate unchanged at 6.50 per cent. The monetary policy stance was maintained at ‘Withdrawal of Accommodation’ with the MPC voting in favour of this in the ratio of 5:1.
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