India’s retail inflation cooled faster-than-expected in May, providing relief to policymakers even as risks from an uneven monsoon remain.
The consumer price index rose 4.25% from a year earlier, according to data released by the Statistics Ministry on Monday. The reading is lowest since April, 2021, and compares with a median forecast for a 4.32% gain in a Bloomberg survey of economists. The inflation print was at 4.70% in April.
Food prices, which make for about half of the index, rose 2.91%, while fuel and light prices gained 4.64%. Clothing and footwear prices increased 6.64% and housing prices rose 4.84%%.
The print provides some comfort to rate-setters looking to align inflation with RBI’s 4% aim on a durable basis. The central bank targets inflation in a 2%-6% range. Last week, the monetary authority kept its key rate unchanged for a second consecutive meeting and retained its stance but highlighted the need for a vigil on prices pressures.
India’s southwest monsoon, which irrigates about half of the country’s farmlands, finally arrived after the longest delay since 2019. Though the spread of the rains will remain crucial to containing food inflation further and deciding the trajectory for future rate cuts. Deficient rainfall also risks denting rural incomes and reducing domestic consumption.
