In a positive development for the Indian economy, retail inflation has reached a 25-month low of 4.25% in May. The decline is primarily attributed to the softening prices of food and fuel items. This sustained decrease in inflation over the past few months indicates a positive trend and provides relief to consumers and policymakers alike.
The latest data based on the Consumer Price Index (CPI) reveals that retail inflation stood at 4.7% in April and 7.04% in May 2022. The current figure of 4.25% marks a significant drop and is the lowest recorded since April 2021 when it was 4.23%. This consistent decline in inflation for the fourth consecutive month demonstrates a positive trajectory for the Indian economy.
The decrease in retail inflation can be attributed to the softening prices of essential commodities such as food and fuel. In May, inflation in the food basket was recorded at 2.91%, lower than the 3.84% registered in April. The food basket, which comprises nearly half of the CPI, plays a crucial role in determining overall inflation trends. Additionally, inflation in fuel and light also eased to 4.64% in May, compared to 5.52% in April.
To maintain stable inflation levels, the Indian government has entrusted the central bank, the Reserve Bank of India (RBI), with the responsibility of ensuring that retail inflation remains around 4% with a margin of 2% on either side. The RBI has been consistently monitoring inflation trends and taking appropriate measures to maintain price stability.
The decline in retail inflation bodes well for the Indian economy as it provides relief to consumers, who benefit from lower prices for essential goods and services. It also allows the RBI to maintain an accommodative monetary policy stance, supporting economic growth and investment.
Last week, the Reserve Bank decided to keep policy rates unchanged at 6.5% and projected that retail inflation for the current fiscal year would average around 5.1%, with June quarter inflation expected to be at 4.6%. This indicates that inflation is expected to remain within the RBI’s comfort zone, fostering stability in the economy.
The significant drop in retail inflation to a 25-month low of 4.25% in May reflects positive trends in the Indian economy. The softening prices of food and fuel items have played a crucial role in driving down inflation. This sustained decline in inflation provides relief to consumers and supports the RBI’s efforts to maintain price stability. The outlook remains positive, and if inflation continues to remain within the desired range, it will contribute to a conducive environment for economic growth and development in India.
Sources By Agencies