India's Retail Inflation Hits 25-Month Low, Boosted by Falling Food and Fuel Costs

Retail Inflation: May had a 25-month low for retail inflation in India, primarily due to lower costs for food and fuel. Retail inflation is at its lowest level since April 2021, when it was 4.23 percent, at 4.25 percent. Retail inflation remains below the Reserve Bank of India's six percent comfort level for the third consecutive month, down from last month's reading of 4.7%. The government has given the central bank the responsibility of ensuring that retail inflation stays at 4% with a margin of 2% on each side.

Largest Component of Consumer Price Basket Records Decline

The overall consumer price basket's largest component, food, which makes up about half of inflation, fell down from 3.84 percent in April to 2.91 percent in May. The Consumer Price Index, sometimes known as the CPI, is almost entirely comprised of food items. Fuel and light inflation decreased from 5.52 percent in April to 4.64 percent.

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Central Bank Holds 6.5% amidst Forecasted Inflation Figures

The central bank maintained its policy rate at 6.5% last week and forecast retail inflation for the current fiscal year to average 5.1%, with June quarter inflation estimated at 4.6%. The statute stipulates that the central bank's inflation target should be 4%, with a tolerance of 2% on either side. Retail inflation in the nation last fell below 4% in September 2019.

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