India’s retail inflation eased to a one-year low of 4.75 per cent in May, driven down by non-food items.

Retail inflation based on the consumer price index (CPI) was 4.83 per cent in April and 4.31 per cent in May 2023. Inflation in the food basket was 8.69 per cent in May, marginally down from 8.70 per cent in April, according to data released by the National Statistical Office (NSO).

Dipti Deshpande, principal economist, Crisil, said: “Non-food categories drove down the headline number, but what’s worrying is the inch-up in key food categories — cereals and pulses — and the rigidity in vegetables.

“The southwest monsoon has arrived on time, now its progress will influence how food inflation moves over the next few months.

“Food inflation has stayed above 8.5 per cent for four months now. In May, seasonal pressures kept it at 8.7 per cent, unchanged from April. Inflation in cereals rose higher, while it was rigid for vegetables. Pulses, on the other hand, rose unexpectedly after easing for four months,” she said.

Headline inflation has seen sequential moderation since February 2024, albeit in a narrow range from 5.1 per cent in February to 4.8 per cent in April 2024.

Suman Chowdhury, chief economist and head of research at Acuité Ratings & Research, said: “Policy makers will continue to derive comfort from core CPI inflation (excluding all food and fuel components), which dropped further to 3.3 per cent in May.”

“Nevertheless, we expect the RBI to maintain the status quo on the monetary policy till the third quarter given the strong growth momentum in the economy and the uncertainty on rate cuts in the developed economies,” he added.

IIP growth

India’s industrial production growth slipped to a three-month low of 5 per cent in April, mainly due to poor show by the manufacturing sector, though mining and power segments performed well, the data showed.

According to the latest data, the mining output growth accelerated to 6.7 per cent in April against a 5.1 per cent expansion in the year-ago month. The manufacturing sector’s growth decelerated to 3.9 per cent in April compared with 5.5 per cent a year ago.

Rajani Sinha, chief economist, CareEdge, said: “A meaningful improvement in the overall consumption scenario remains crucial for the industrial activity.

“While prospects of good monsoon remain supportive of rural demand, the temporal as well as spatial distribution of monsoon is critical.” he said.