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Retail inflation rises to 6-month high at 6.3% in May

By Priyanka Verma 
Updated Date

NEW DELHI: India’s retail inflation, measured by the Consumer Price Index (CPI), accelerated to a six-month high of 6.3% in May, breaching the upper band of Reserve Bank of India’s flexible inflation target.

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As per data from the National Statistical Office, food inflation shot up to 5% in May from 2% in April as prices of meat, fish, eggs, oils and fats surged. Fuel bill zoomed 11.6% as the government raised retail prices of petrol and diesel. Services inflation also rose significantly as costs of health, transport and personal care increased during the second wave of the pandemic.

Wholesale price inflation galloped to 12.94% in May after breaching double digits in April on the back of rising global commodity prices.

The Reserve Bank of India expects a normal southwest monsoon along with comfortable buffer stocks to help keep cereal price pressures in check. “On the other hand, the rising trajectory of international crude prices within a broad-based surge in international commodity prices and logistics costs is worsening cost conditions. These developments could keep core price pressures elevated, although weak demand conditions may temper the pass-through to consumer inflation,” RBI had said in its latest monetary policy review.

The central bank had said favourable base effects that brought about moderation in headline inflation by 1.2 percentage points in April, may persist through the first half of the year, conditioned by the progress of the monsoon and effective supply side interventions by the government.

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“Upside risks to inflation emanate from persistence of the second wave and consequent restrictions on activity on a virtually pan-India basis. In such a scenario, insulating prices of essential food items from supply side disruptions will necessitate active monitoring and preparedness for coordinated, calibrated and timely measures by both Centre and states to prevent emergence of supply chain bottlenecks and increase in retail margins,” it added.

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