Home Global Economy Retail inflation rises to 4.87% in May on certain food items

Retail inflation rises to 4.87% in May on certain food items

Retail inflation inched up to 4.87 in May on increase in prices of certain items in the food basket, as per the government data released today.

Based on the Consumer Price Index (CPI), the inflation was at 4.58 per cent in the preceding month April. In May last year, it was 2.18 per cent. As per the data of the Central Statistics Office (CSO), food inflation rose to 3.10 per cent last month, as against 2.8 per cent in April.

India’s six-member monetary policy committee raised the repo rate to 6.25 percent in its June meeting and maintained a neutral stance, saying higher crude oil and housing prices is pushing inflation up. The MPC also added that the “significant rise” in household inflation expectations could feed into wages and input costs.

A strong base effect from the same month last year and prevailing high crude oil prices resulted in higher inflation in May, said Devendra Kumar Pant, chief economist at India Ratings & Research. “Higher retail inflation in May 2018 also originated from food inflation. It increased to three month high of 3.1 percent mainly due to fruits, vegetables, cereals and oil & fats.”

Core-core inflation that strips out the impact of food, fuel, transportation, and other volatile items continued to remain sticky. It hit a 45-month high of 6.17 percent in May, according to India Ratings’ calculations. A number of economists have been now citing core-core inflation as a concern. “It is likely that the June 2018 inflation number may breach RBI’s 1HFY19 inflation forecast of 4.8-4.9 percent,” Pant said.

The RBI now expects inflation to stay between 4.8 and 4.9 percent in the first half of the current financial year.

The price data is collected from selected towns by the Field Operations Division of NSSO and from selected villages by the Department of Posts. The data is received through web portals, maintained by the National Informatics Centre.

(Inputs from PTI)