India’s retail inflation witnessed a notable decline to a 12-month low, settling at 4.75% in May on an annual basis, as per government data released on Wednesday. This figure marks a decrease from April’s 4.83%, a development that surpassed the expectations of many economists.
The latest data indicates a continued adherence to the Reserve Bank of India’s target range of 2-6% for retail inflation, a trend sustained since September 2023.
According to the government’s report, the year-on-year inflation rate based on the all-India Consumer Price Index (CPI) stands at 4.75% for May 2024. Notably, rural areas recorded an inflation rate of 5.28%, while urban areas saw a lower rate of 4.15%.
A significant decline in year-on-year inflation is observed in the spices category compared to April 2024, signaling a positive trend. Additionally, inflation rates for categories like ‘Clothing & Footwear,’ ‘Housing,’ and ‘Miscellaneous’ have also seen a decrease since the previous month.
The continuous easing of retail inflation bodes well for the economy and is likely to have a positive impact on equity markets in the upcoming trading sessions. While the decrease in inflation may seem marginal, its stability provides the Reserve Bank of India (RBI) with increased flexibility in its monetary policy decisions.
The RBI’s recent decision to maintain key lending rates unchanged underscores its commitment to keeping inflation in check. With the central bank forecasting inflation at 4.5% for FY25, the current trajectory of retail inflation aligns with its objectives, providing a favorable backdrop for economic policy decisions moving forward.
3.5
