Retail inflation moderates to 8.28% in May

In a relief to the common man, India’s retail inflation moderated in the month of may signalling a robust start for the new BJP-led government that has promised to break the spell of weak economic growth and high inflation.

Consumer price inflation (CPI) eased to 8.28 per cent in May from a three-month high of 8.59 per cent in the previous month aided by lower food prices, especially vegetables and cereals, as per the data released by the government.

The ease in inflation number on the back of a handsome export growth and better than expected industrial output number suggests that the economic recovery is round the corner. India’s economy grew sub-five per cent for two consecutive years that is less than half the peak of economic performance experienced in the pre-crisis period. But, inflation remained sticky at around 10 per cent.

As per today’s data, food inflation fell slightly to 9.56 per cent in May against 9.66 per cent in April. Vegetable prices were down by 15.27 per cent. Cereals and dairy products too became cheaper in May.

However, fruit prices turned costlier. Fruit and vegetable prices generally spike during peak summer. Analysts said, government steps are required to bring down food inflation in case of deficient monsoon.

Thursday's CPI numbers are expected to bring a fresh cheer in the stock and bond markets which have been rallying in hope of an economic turnaround under Prime Minister Narendra Modi.

However, the underlying fears of El-Nino induced poor monsoon may spoil the party and prices of essential commodities, especially that of food may spike in coming months, according to analysts.

An ease in retail inflation gives more leeway to the Reserve Bank of India to go in for a policy rate cut in the next review meeting, according to experts.