India’s retail inflation based on the Consumer Price Index (CPI) likely rose to a three-month high of 5% in May, primarily on account of rise in prices of vegetables and pulses, according to the median of a poll of 18 economists conducted by FE.
In April 2024, the headline inflation was 4.82%, and in May 2023, it was 4.31%. The National Statistical Office is going to release the CPI data for May on Wednesday. The estimates of economists for May CPI print ranged from as low as 4.5% to as high as 5.2%. If the headline print comes in at 5%, the overall index will rise 0.7% month-on-month, at the highest pace in 10 months.
Madan Sabnavis, chief economist, Bank of Baroda, said that relentless pressure on the food side will keep CPI elevated closer to the 5% mark in May. “In particular, vegetables and pulses have witnessed an increase in prices last month,” he said. Data sourced from the department of consumer affairs showed retail prices of potato soared over 9% on month in May and that of key pulses such as tur rose over 2%.
Centre for Monitoring Indian Economy (CMIE) expects food inflation, which constitutes about 40% of the CPI basket, to have inched up to 9.1% in May from 8.7% in the preceding month. Soaring temperatures in many parts of the country have likely affected the summer crop of fruits and vegetables leading to an increase in their prices, said CMIE’s Mitika Malhotra. Core inflation, meanwhile, likely edged down in May. Barclays expects core inflation to have eased to 3.1% during the month from 3.2% in April.
“Softer momentum in core items, and the indirect impact of the cut in retail gasoline prices in March likely drove the moderate easing,” said Barclays in a note. Petrol and diesel for transportations are constituents of the core CPI basket.
The Monetary Policy Committee had commented that prices of industrial metals had increased in double-digits during January-May 2024. “This is expected to feed into the core inflation computations,” said CMIE.
If the increase in prices of industrial metals persist, they could offset part of the gains expected from a better kharif crop given that the monsoon is expected to be better this year, it said.
