Key Facts
• On June 12, India reported May’s Consumer Price Index (CPI) inflation at 2.82% year-on-year.
• Inflation slowed from April’s 3.16%, driven by a deceleration in food prices.
• The figure was below economists’ forecast of 3% and the Reserve Bank of India’s (RBI) 4% target.
• Food price inflation dropped to 0.99% in May, down from 1.78% in April, marking the lowest since October 2021.
• Grain inflation eased to 4.77% from April’s 5.35%, while vegetable prices fell 13.7% compared to an 11% drop in April.
• Pulses prices declined 8.22%, widening from April’s 5.23% decrease.
• Core inflation, excluding volatile items like food and energy, was estimated at 4.17–4.20%, slightly up from April’s 4–4.1%.
• Last week, the RBI cut its key repo rate by 50 basis points to boost economic growth amid global uncertainties.
• Economists suggest further rate cuts may be possible if inflation remains subdued.
Summary
India’s May inflation rate slowed to 2.82%, marking the fourth consecutive month below the Reserve Bank of India’s 4% target. The decline was primarily driven by easing food prices, with food inflation dropping to 0.99%, the lowest since October 2021. Grain and vegetable prices also saw significant reductions. Core inflation, excluding food and energy, remained stable at around 4.17–4.20%. In response to global economic uncertainties, the RBI recently cut its key policy rate by 50 basis points, exceeding market expectations. Economists believe further rate cuts could be possible if inflation continues to stay low.
