CPI Inflation: India’s Retail Inflation Hits 25-Month Low At 4.25% In May 2023

India’s consumer price index (CPI) inflation has come down sharply to 4.25 per cent in May 2023. In April 2023, the CPI inflation had eased to an 18-month low at 4.7 per cent.

New Delhi: India’s consumer price index (CPI) inflation has come down sharply to 4.25 per cent in May 2023. In April 2023, the CPI inflation had eased to an 18-month low at 4.7 per cent.

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities said, “May CPI inflation at 4.25% was lower than expectations and benefitted from a favorable base effect as well as a further fall in food inflation. Food inflation benefited 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. Core inflation was broadly unchanged at 5.15% though it is likely to inch up marginally over the next few prints. Overall, the RBI will see this print favorably as it remains well within its estimates. However, it 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.”

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is tasked with keeping inflation within a 2 per cent to 6 per cent range. However, it is expected to try and anchor inflation close to the 4 per cent mid-point of that band.

On June 8, 2023, while announcing the second monetary policy commitee stance of this financial year, the central bank had projected CPI inflation at 5.1 per cent. RBI Governor Shaktikanta Das-led rate-setting panel has predicted inflation at 4.6 per cent for the first quarter of fiscal 2023-34 (Q1FY24).

For the second quarter, RBI estimates retail inflation to come in at 5.2 per cent, for Q3FY24 it expects 5.4 per cent and for Q4FY24 the central bank expects inflation to come in at 5.2 per cent.

Economists had expected May’s headline retail inflation to fall further toward 4 percent — the midpoint of the central bank’s target and a level last seen in January 2021, according to news agency Reuters.