New Delhi, 12 June

Retail inflation continued its downward slide to reach a one-year low of 4.75 per cent in May due to a marginal decline of prices in the food basket and remained within the Reserve Bank's comfort zone of below 6 per cent, according to government data released on Wednesday.

The Consumer Price Index (CPI) based retail inflation -- on a declining trend since January -- was 4.83 per cent in April 2024 and 4.31 per cent in May 2023 (the previous low). Inflation in the food basket was at 8.69 per cent in May, marginally down from 8.70 per cent in April, according to the data released by the National Statistical Office (NSO).

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

According to the data released by NSO, all India inflation based on CPI is the lowest in May 2024 since the year-ago month when it was 4.31 per cent. It is less than 6 per cent since September 2023.

During May, the inflation in vegetables was higher compared to the preceding month, while it was low in the case of fruits. The government has tasked the Reserve Bank to ensure the CPI inflation remains at 4 per cent with a margin of 2 per cent on either side.

Earlier this month, the RBI projected the CPI inflation for 2024-25 at 4.5 per cent, with Q1 at 4.9 per cent, Q2 at 3.8 per cent, Q3 at 4.6 per cent, and Q4 at 4.5 per cent. The central bank mainly factors in the retail inflation while arriving at its bi-monthly monetary policy.

Commenting on the CPI data, Aditi Nayar, Chief Economist, Icra, said the headline inflation unexpectedly eased to a 12-month low of 4.75 per cent in May 2024 as all sub-groups, barring fuel and light, either witnessed a softening or remained unchanged compared to the previous month.

Icra estimates the food and beverages inflation to ease somewhat in June 2024 vis-a-vis the May 2024 print while remaining elevated above the 7 per cent mark in the month. "This would help contain the headline CPI inflation print at sub-5 per cent in June 2024. Thereafter, a favourable base is expected to lead to a sharp albeit temporary fall in the CPI inflation to 2.5-3.5 per cent in July 2024 and August 2024," Nayar said.

The NSO data further revealed that retail inflation was higher in rural areas at 5.28 per cent compared to 4.15 per cent in urban areas.

State-wise, inflation was higher than the national level of 4.75 per cent in Andhra Pradesh, Assam, Bihar, Chhattisgarh, Haryana, Karnataka, Kerala, Odisha, Rajasthan, Tamil Nadu, Telangana, and Uttar Pradesh. Odisha witnessed the highest inflation of 6.25 per cent, while Delhi recorded the lowest at 1.99 per cent. The price data are collected from selected 1,114 urban markets and 1,181 villages covering all states/ UTs by NSO on a weekly roster.

During May, NSO collected prices from 100 villages and 98.5 per cent of urban markets.