Mumbai, June 13 (Mayank Nigam) India’s consumer price index (CPI)-based retail inflation eased to 7.04 per cent in May 2022 from 7.79 per cent in the previous month, according to data released by the government on Monday. Retail inflation was 6.30 per cent in May 2021. As per the data released by National Statistical Office (NSO), food inflation in May this year stood at 7.97 per cent as compared to 8.31 per cent in the previous month. While inflation has softened it still stays above the Reserve Bank of India (RBI)’s comfort level. In its bid to douse the inflation fire, the RBI has increased the repo rate by a significant 90 basis points (bps) since May (40bps in May 2022 and 50bps in June 2022). The RBI is tasked to maintain retail inflation in the range of 2-6 per cent. It factors in retail inflation while finalising its monetary policy. The upward trend in consumer price index (CPI)-based inflation in the last few months has been a cause of worry for the government and policy-makers for the last several months.
Last month, the government reduced central excise duty by Rs 8 per litre for petrol and by Rs 6 per litre for diesel providing relief to the common man. It also allowed duty-free import of 20 lakh tonnes each of crude soyabean oil and crude sunflower oil for two years till March 31, 2024 to cool down rising prices of essential items. At 7.79 per cent in April, retail inflation had reached its eight-year high sounding red alert for the policy-makers. Commenting on May inflation numbers, ICRA Chief Economist Aditi Nayar said,”The May 2022 CPI inflation printed mildly higher than our forecast (6.9%) led by food and beverages, fuel and light, and clothing and footwear, while that for miscellaneous items trailed our expectation, offering some relief in light of the relatively stronger demand momentum seen for the services segment. While the mild dip in the food and beverages inflation benefitted from a high base, the cooling itself was fairly broad-based across the components,” said ICRA Chief Economist Aditi Nayar. She noted that the double whammy of the rise in the crude oil price and the rupee depreciation pose upside risks to the June 2022 CPI inflation print, even as the lower than expected momentum in the services inflation in May 2022 provides some relief. Vivek Rathi, Director-Research Knight Frank India said that the narrowing gap between WPI (wholesale inflation) and CPI highlights the pass through of input costs rise from producers to consumers as evident in elevated core inflation of 6.2% which is still high albeit with slight moderation. “In the coming months, the spillovers from global commodity and food prices would continue to add stress to domestic prices. We thus, do not see India’s inflation cooling down in the near term and in such a scenario maintaining the strength of domestic demand will be crucial from policy perspective,’’he said.