Retail inflation rose to a six-month high of 6.3% in May, data from the Union government’s National Statistics Office showed on Monday. May’s data has accelerated in comparison to April’s retail inflation of 4.23%. Inflation in rural areas was at 6.48%, and in urban areas at 6.04%. Inflation in the food basket was 5.01% in May, significantly up from 1.96% in the preceding month.
This is also beyond the threshold, with the Union government asking the Reserve Bank of India to keep the retail inflation at 4% with a margin of 2% on either side. The RBI, which mainly factors in retail inflation while arriving at its monetary policy, had left the key interest rate unchanged earlier this month. The central bank has projected the CPI inflation at 5.1% during 2021-22 — 5.2% in Q1; 5.4% in Q2; 4.7% in Q3; and 5.3% in Q4 of 2021-22, with risks broadly balanced.
Year-on-year, Inflation in meat and fish was up 9.03%, eggs was 15.16%, oil and fats was 30.84%, and pulses and products at 9.39%. Fuel prices surged last month as well, and the inflation rate came in at 11.58%.
“Upside risks to inflation emanate from persistence of the second wave and consequent restrictions on activity on a virtually pan-India basis. In such a scenario, insulating prices of essential food items from supply side disruptions will necessitate active monitoring and preparedness for coordinated, calibrated and timely measures by both Centre and states to prevent emergence of supply chain bottlenecks and increase in retail margins,” the RBI had said in its latest monetary policy review.
Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India, said, "After 5 months of staying within RBI’s comfort band, the CPI inflation for May 2021 has again shot up above 6%. The surge in inflation has been across all components including, food, fuel and core inflation. The WPI inflation has also inched up sharply in last few months in response to the rise in global commodity prices. For businesses, apart from raw material prices, labour price has also gone up in the last few months due to labour shortage. While the demand force in the economy remains weak currently, the concern is that the supply-side factors could continue to put upward pressure on inflation going forward.”
"Overall, the broad-based higher-than-expected rise in inflation is concerning. *Though it is unlikely to result in any monetary tightening, it rules out any further easing also," said Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services.
Data released earlier in the day showed that wholesale price-based inflation accelerated to a record 12.94% in May on account of rising prices of crude oil, manufactured goods and a low base of last year. In May last year, WPI inflation was (-) 3.37% and in April 2021, WPI inflation hit double digit at 10.49%. This is the fifth straight month of uptick seen in the wholesale price index (WPI)-based inflation.
"The annual rate of inflation, based on monthly WPI, was 12.94% for the month of May, 2021 (over May, 2020) as compared to (-) 3.37 per cent in May 2020. "The high rate of inflation in May 2021 is primarily due to low base effect and rise in prices of crude petroleum, mineral oils viz. petrol, diesel, naphtha, furnace oil etc. and manufactured products as compared to the corresponding month of the previous year," the Commerce and Industry Ministry said. Inflation in fuel and power basket spiked to 37.61% during May, against 20.94% in April, amid hardening of global commodity prices.
With inputs from PTI