Consumer Inflation Accelerates To 5.76% In May

The retail inflation measured on the Consumer Price Index for April has been revised upwards to 5.47 per cent from the earlier 5.39 per cent, government data showed.

Economists surveyed by Reuters had forecast retail inflation to inch up to 5.52 per cent in May.

Food price inflation in rural areas increased to 7.75 per cent in May 2016 from 4.74 per cent in May 2016. The rise may make it hard for the RBI to lower the interest rates.

Consumer Price Index, which measures inflation in India, rose to 5.76% in May, according to reports.

What is more interesting is the fact that in January 2015, inflation was at 5.19%, as shown by the chart, while the repo rate at that time was brought down from 8% to 7.75%. Inflation in vegetables and pulses went up to double digits to 10.77% compared to 4.98% in the previous month and 4.72% in the corresponding month of the previous year.

Monday’s data comes on the heels of a 0.8 per cent contraction in industrial production in April.

PTI report said that the rise may make it hard for the Reserve Bank of India (RBI) to lower the interest rates in the immediate future. Now much would hinge upon normal monsoon and a reasonable spatial and temporal distribution of rainfall.

On a monthly basis, consumer prices remained flat for the second straight month in May. Shortage in the sugar market has also moved up prices and could move up further during the festival season.

“A prudent food management policy and modest increase in MSPs (minimum support price) is likely to keep a lid on any sharp upticks”, Bhardwaj said. Moreover, the rise in service tax rate and retail prices of petrol and diesel would add some upward pressure to CPI inflation, ICRA said.

“From August 2016 onward, we expect food inflation to soften on account of a number of factors, including a favourable base effect”.