As of May 2024, retail inflation in India has dropped to 4.75%, the lowest level in a year, according to figures issued on June 12 by the Ministry of Statistics and Programme Implementation. This represents a little decline from April’s 4.83% and carries on the trend of inflation remaining below 5% for three months running since March 2024.
Core Inflation and Consumer Price Food Index Trends
Core inflation, which does not include the more erratic categories like food and fuel, reached a record low of 2.97%.The Consumer Price Food Index (CPFI), on the other hand, remained almost unchanged at 8.69% from 8.7% in April, suggesting that food costs are still high.
RBI’s Inflation Projections and Fuel Price Dynamics
The Reserve Bank of India (RBI) kept its 4.5% inflation forecast for FY25 in its most recent policy review, but it issued a warning that food prices might continue to be unreasonably high. A contraction in the fuel and light category, which fell by 3.83% in May, but at a slower rate than in the previous month, contributed to the fall in headline inflation.
Food and Beverages Inflation Unchanged
As it was in April, the rate of inflation for food and drink was constant at 7.87% in May. The surprising easing of headline CPI inflation to 4.75% was primarily caused by a lower-than-expected reading for the food and beverage category.
Industrial Production Growth Slows
The Index of Industrial Production (IIP) growth decreased to 5% in April—the lowest level in three months—from 5.4% in March, coinciding with the inflation statistics. This suggests that industrial activity has somewhat cooled.
Detailed Analysis of Food Prices
Vegetable prices in the food category decreased slightly from 27.80% in April to 27.33% in May. On the other hand, the cost of grains grew month over month, while the price of pulses increased somewhat, from 16.84% to 17.14%. Prices for meat and fish fell significantly, from 8.17% in April to 7.28%.
The rate of inflation for food and drinks did not change from the previous month, although seven of the twelve sub-groups—vegetables, meat and fish, spices—saw a decline in inflation. Notably, from 7.75% in April to 4.27% in May, spice prices declined.
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