India’s retail inflation eases in May 2023 to hit 25-month lows

According to official data released by the National Statistical Office (NSO) on Monday, June 12, 2023, India has achieved an impressive feat in its economic landscape. Retail inflation has reached a remarkable 25-month low of 4.25% in May 2023, with a notable easing of food prices. This figure represents the lowest retail inflation rate since April 2021, when it stood at 4.23%. Furthermore, the Index of Industrial Production (IIP) has shown a growth rate of 4.2% in April 2023, in comparison to the 6.7% recorded during the same period the previous year.

The decline in retail inflation is particularly evident in the food basket, with inflation in this category easing to 2.91% in May 2023 from 3.84% in April. Similarly, inflation in fuel and light has also decreased, falling to 4.64% from 5.52% in April.

Impressively, India has now experienced three consecutive months of retail inflation staying below the upper tolerance limit of 6% set by the Reserve Bank of India. The Consumer Price Index (CPI) inflation stood at 6.44% in February 2023, followed by 5.66% in March 2023, 4.7% in April 2023, and now rests at an encouraging 4.25% in May 2023.

During the recent monetary policy review conducted by the Monetary Policy Committee (MPC) of the RBI, a unanimous decision was made to maintain the key repo rate unchanged at 6.50%. The monetary policy stance has also been retained as ‘Withdrawal of Accommodation,’ with a strong voting ratio of 5:1 in favor of this decision.

Looking ahead, the central bank has projected CPI-based inflation for FY24 at 5.1%, with expected figures of 4.6% in the first quarter, 5.2% in the second quarter, 5.4% in the third quarter, and 5.2% in the fourth quarter. The RBI considers the risks associated with these projections to be evenly balanced, emphasizing the cautious optimism surrounding the economic outlook.

*CPI stands for Consumer Price Index and CFPI stands for Consumer Food Price Index

The National Statistical Office has collected inflation price data from a total of 1,114 urban markets and 1,181 villages, encompassing all states and Union Territories. In the month of May 2023, the NSO successfully gathered price data from 98.56% of the villages and 97.04% of the urban markets. The reported market-wise prices accounted for 88.56% in rural areas and 90.76% in urban areas.