India’s retail inflation inched up to 3.93 percent in May compared to 3.48 percent in the preceding month due to higher food prices, according to official data.
Consumer Price Index-based inflation in the food basket was 4.78 percent in May, higher from 4.2 percent in April, according to the National Statistical Office (NSO) data.
As per the data, the precious metal jewellery, tomato, ginger, raisin (kishmish), and monacca were the five items with the highest inflation.
On the other hand, potato, peas, motor car and jeep, cumin (jeera), and motorcycle and scooter were the top five items with low inflation at the All India combined level in May 2026.
RBI projections
The Reserve Bank of India (RBI), which mainly factors in CPI when arriving at its monetary policy, has been mandated by the government to ensure that headline inflation remains at 4 percent, with a 2 percent margin on either side.
Last week, the RBI raised its inflation projection for the current fiscal to 5.1 percent from 4.6 percent, largely due to mounting input costs, driven by the pass-through of higher global energy prices to retail petrol and diesel prices.
Since May, retail fuel prices have been raised cumulatively by 7.4 percent for petrol and 8.4 percent for diesel.
The increase implies a direct impact of about 36 basis points on headline inflation, which, along with second-order effects, would get reflected in consumer price (CPI) inflation in the coming months, the RBI said in its monetary policy statement early this month.
Inflation may average around 5-6% in FY27: Economists
Garima Kapoor, Deputy Head of Research and Economist at Elara Capital said that with recent measures announced by the RBI and the government amid the likely expected resolution of the West Asian crisis, the macroeconomic backdrop has turned less adverse.
“We see Inflation averaging 5.2-5.3% in FY27 and see RBI hiking rates by 50bps in H2FY27”, Kapoor added.
Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group said that the more important question is whether higher fuel costs begin to generate broader second-round effects through transport, logistics and other input costs. That transmission will need to be monitored closely before drawing firm conclusions on the inflation outlook, Hajra said.
“Our assessment is that headline retail inflation could breach 6% at some point over the next six months. Even so, the Reserve Bank of India may refrain from adopting a decisively hawkish stance, provided core inflation remains anchored around 4% and inflationary pressures do not become broad-based” Hajra added.