India May CPI inflation seen at 20-month low of 4.4%
Informist, Friday, Jun 9, 2023
By Priyansh Verma
NEW DELHI – India's retail inflation rate, based on the Consumer Price Index, likely fell to a 20-month low of 4.4% in May, from 4.70% in April, mainly on account of the statistical effect of a high base, according to an Informist poll of 18 economists.
The CPI inflation rate was 7.04% in May last year. A back-of-the envelope calculation shows that to reach 4.4% inflation rate, the overall index would actually be up 0.7% month-on-month.
The National Statistical Office is scheduled to release the inflation data for May at 1730 IST on Monday.
"Moderation in food inflation as well as continued support from a high base is expected to pull CPI inflation closer toward RBI's medium-term target of 4% in May," said Shambhavi Priya, associate economist, CARE Ratings.
According to data from the consumer affairs department, the price movement in key food items saw a mixed trend in May. Prices of potato and tomato rose 7.0% and 1.9%, respectively, on a sequential basis, while that of onion fell 1.5%. The price of rice inched up 0.5% month-on-month, whereas wheat contracted 0.3%. Pulses prices rose 1.0% on month in May, while those of edible oils declined by 1.6%, the data showed.
Economists expect CPI core inflation, which excludes food and fuel items, to rise marginally in May.
"Sequentially, we expect stickiness in inflation in housing, clothing and footwear, and health and education," said Rahul Bajoria, managing director and head of emerging markets Asia (ex-China) economics, Barclays. Barclays expects core inflation to rise to 5.3% in May from a near three-year low of 5.2% in April.
With the April CPI print down to 4.70%, the Reserve Bank of India Thursday cut its CPI inflation projection by 50 basis points to 4.6% for Apr-Jun. For the year ending March, the central bank has projected CPI inflation to average 5.1%, compared with its earlier estimate of 5.2%.
The RBI, which kept the policy repo rate unchanged at 6.50% at its latest policy review on Thursday, said its aim is to reduce inflation to 4%. "Let me re-emphasise that headline inflation still remains above the target and being within the tolerance band is not enough. Our goal is to achieve the target of 4.0%, going forward," Governor Shaktikanta Das said.
In its policy statement, the RBI said that going forward, the headline inflation trajectory is likely to be shaped by "food price dynamics".
Following is a summary of the details and estimates of respondents for CPI inflation in May:
