Retail inflation hits 4-mth high of 4.87% in May on costlier veggies, fuel

For protein rich items such as meat and fish, eggs as well as milk and products, the inflation in May slowed compared to last month

Retail inflation jumped to 4-month high of 4.87 per cent in May on costlier food items such as fruits, vegetables and cereals coupled with high fuel rates.

Based on Consumer Price Index (CPI), the retail inflation was at 4.58 per cent in the preceding month, April. In May 2017, however, it was at a low of 2.18 per cent.

The previous high in retail inflation was in January this year at 5.7 per cent.

The overall consumer food price index shot up to 3.10 per cent in May, from 2.80 per cent in April, as per the Central Statistics Office (CSO).

Fruit prices grew at a faster pace of 12.33 per cent in May as against 9.65 per cent in April, while vegetables were costlier by 8.04 per cent (from 7.29 per cent month ago).

Cereals and products saw 2.78 per cent inflation in May as against 2.56 per cent in April, while oil and fats turned dearer at 2.46 per cent from 2.11 per cent in April.

For the fuel and light category, the inflation last month stood at 5.8 per cent, up from 5.24 per cent.

However, for protein rich items such as meat and fish, eggs as well as milk and products, the inflation in May slowed compared to last month.

The CPI-based retail inflation is a key input for the Reserve Bank of India to decide on its key rate.

In its latest policy review earlier this month, the RBI raised the repo rate -- at which it lends to banks -- by 0.25 per cent to 6.25 per cent, the first hike in more than four years due to growing concerns about inflation stoked by rising global crude oil prices as well as domestic price increases.

The banking regulator has revised the first half inflation projection to 4.8-4.9 per cent in the current fiscal, and 4.7 per cent in the second half -- including the HRA impact of central government employees.

Excluding, the HRA revisions, the CPI inflation is projected at 4.6 per cent in first half (April-September) and 4.7 per cent in second half (October-March).

RBI had said the decision of the Monetary Policy Committee to hike the rate was consistent with the neutral stance and in consonance with the objective of achieving the medium-term target for CPI inflation of 4 per cent within a band of (+/-) 2 per cent, while supporting growth.

Photograph: Danish Siddiqui/Reuters