Retail inflation jumped to 6.3% in May from 4.2% in April

According to official statistics issued on Monday, Retail inflation, as measured by the consumer price index (CPI), hit a six-month high of 6.3% in May, owing mostly to an increase in food costs.

In May, the food basket's inflation rate was 5.01%, up from 1.96% the month before. During the month, prices in the fuel and light category increased by 11.58%.

In April, the rate of inflation was 4.23%. In November 2020, retail inflation reached a new high of 6.93%.

The rate of inflation exceeded the Reserve Bank of India's (RBI) medium-term objective of 4%. Since the inaugural meeting of the Monetary Policy Committee (MPC), which sets the main interest rate, in October 2016, CPI inflation has crossed the upper range of the inflation goal around ten times.

The most significant price increase was in the 'oils and fat' section, which increased by 30.84 % on an annual basis. The National Statistical Office (NSO) also disclosed that the rates of price increases in meat and fish, egg, fruits, and pulses and products were 9.03 %, 15.16 %, 11.98 %, and 9.39 %, respectively, according to the May CPI data.

When determining monetary policy, the Reserve Bank primarily considers retail inflation as measured by the CPI. The central bank kept the main interest rate steady for the sixth time in a row at its bi-monthly policy review meeting earlier this month.

The government has entrusted the RBI's MPC with taming retail inflation based onCPI at 4% (+,-2%). CPI inflation is expected to be 5.1% in 2021-22, with risks largely balanced, according to the central bank's recent policy meeting – 5.2% in Q1, 5.4% in Q2, 4.7% in Q3, and 5.3% in Q4 of 2021-22.

Previously, wholesale price-based inflation (WPI) hit a new high of 12.94% in May, owing to higher crude oil and manufactured goods prices. This is the sixth month in a row that WPI inflation has increased. The figures reached double digits in April, at 10.49%.