Retail inflation surges to 5.76% in May on higher food and fuel prices

14 Jun 2016 Evaluate

The retail inflation or the Consumer Price Index (CPI) inflation, spiked again for the second consecutive month in May, on account of high food and fuel prices. The retail inflation for May rose to 5.76 per cent, compared with 5.39 per cent in April. This numbers has weakened the prospects of a rate cut by the Reserve Bank of India in August this year. Meanwhile, CPI in April was revised upwards to 5.47 per cent from 5.39 per cent earlier.

As per the data released by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation, the CPI (Rural, Urban, Combined) on Base 2012=100 in May stood at 6.45 percent, 4.89 percent and 5.76 percent respectively, compared to 5.52 percent, 4.41 percent and 5.01 percent same period a year ago. Similarly Consumer Food Price Index (CFPI) for all India Rural, Urban and Combined stood at 7.75 percent, 7.24 percent and 7.55 percent a year ago. The General Indices (Provisional) for the month of May 2016 for Rural, Urban and Combined were 130.3, 126.6 and 128.6 respectively. The CFPI for Rural, Urban and Combined for the same month were 133.4, 134.8 and 133.9 respectively.

Food inflation which counts for nearly half of CPI, jumped to 7.55 percent in May 2016 from 6.40 percent in previous month and 4.80 per cent in May 2015. The big shock came in the form of Vegetable inflation that rose to 10.77 percent in May from 4.98 percent in April, the highest level in fourteen months. Prices of pulses climbed 31.57 percent followed by sugar and confectionery which became dearer by 13.96 percent. While clothing, footwear inflation declined to 5.37 percent compared to 5.56 percent cereals & products inflation rose to 2.59 percent versus 2.43 percent in April. Combined fuel & light inflation declined to 2.94 percent compared to 3.03 percent in the previous month. Urban consumer housing inflation also dipped to 5.35 percent versus 5.37 percent in April.

The May inflation acceleration is above RBI's expectation of between 5 per cent retail inflation by March 2017. The RBI, which retained its key rates in the last policy review, citing uncertainty on inflation and the monsoon situation, is likely to turn even more cautious after the May numbers as it takes into account the retail inflation figures while formulating monetary policy.

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