Retail Inflation Rises To 3.93% In May, CPI Moves Up From 3.48% In April Amid Higher Food Prices

Mumbai: Retail inflation inched up to 3.93 percent in May from 3.48 percent in the preceding month due to higher food prices, according to official data released on Friday.

Despite the increase, inflation remained below the Reserve Bank of India's (RBI) medium-term target of 4 percent.

Food Inflation Edges Higher

Consumer Price Index (CPI)-based inflation in the food basket stood at 4.78 percent in May, up from 4.2 percent in April, according to data released by the National Statistical Office (NSO).

Food prices remain a key driver of overall inflation, given their significant share in household expenditure across the country.

Jewellery, Tomato Among High-Inflation Items

Precious metal jewellery, tomato, ginger, raisin (kishmish) and monacca were the five items that recorded the highest inflation in May.

On the other hand, potato, peas, motor car and jeep, cumin (jeera), and motor cycle and scooter were the five items with the lowest inflation at the all-India combined level during the month.

RBI Mandate and Inflation Outlook

The RBI, which mainly factors in CPI while formulating its monetary policy, has been mandated by the government to keep headline inflation at 4 percent, with a 2 percent margin on either side.

Last week, the RBI raised its inflation projection for the current fiscal to 5.1 percent from 4.6 percent, largely due to mounting input costs driven by the pass-through of higher global energy prices to retail petrol and diesel prices.

Fuel Prices Add to Inflation Concerns

Since May, retail fuel prices have been raised cumulatively by 7.4 percent for petrol and 8.4 percent for diesel.

The increase implies a direct impact of about 36 basis points on headline inflation. Along with second-order effects, it will be reflected in CPI inflation in the coming months, the RBI said in its monetary policy statement issued earlier this month.