June 12 (Reuters) – India’s retail inflation rose to 3.93% year-over-year in May from 3.48% in April, driven by higher food and fuel costs, government data showed on Friday, as the outlook continued to remain clouded by price pressures stemming from the Middle East conflict.
A Reuters poll had projected retail inflation at 4.0%.
COMMENTARY:
SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI FINANCIAL SERVICES, MUMBAI
“The key is whether higher fuel costs trigger secondary inflation through transport and logistics, a transmission requiring close monitoring before projecting the inflation outlook.
Our assessment is that headline retail inflation could breach 6% at some point over the next six months. Even so, the Reserve Bank of India may refrain from adopting a decisively hawkish stance, provided core inflation remains anchored around 4% and inflationary pressures do not become broad-based.”
SUVODEEP RAKSHIT, CHIEF ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI
“Retail fuel prices will start having an impact from June and could push inflation closer to 5-6% by September-October. Additionally, food prices, especially short-cycle crops such as vegetables and fruits, need to be monitored as weather-related disruptions are likely to play out through the monsoon.
The RBI is likely to wait and watch how these risks play out, as well as for signs of a sharp increase in inflation expectations and second-order impacts over the next few months.”
PRATEEK ANCHA, SVP I, BUSINESS ECONOMIC RESEARCH, AXIS BANK, MUMBAI
“The headline inflation in May at 3.9% is now close to RBI’s 4% target. While higher food prices and pass-through of fuel price hikes were expected, even core CPI inflation rose to 3.8% (vs. 3.4%) primarily driven by the rise in restaurants’ prices (5.7% vs 4.2%) as supply of commercial LPG was lower.”
RAJEEV SHARAN, HEAD OF RESEARCH, BRICKWORK RATINGS
“The rise in food inflation to 4.78% underscores persistent price pressures in perishables, particularly tomatoes, ginger and other vegetables.
Core inflation remained contained at around 3.7%, indicating that the rise is still being driven more by food and imported energy costs than by broad-based demand pressures.
Geopolitical tensions and higher crude oil prices likely added to transport, logistics and input costs, while moderation in several other categories helped prevent a sharper spike. Overall, May’s print reflects a gentle re‑acceleration in inflation, shaped by both weather‑related food volatility and imported cost pressures, even as core categories continue to provide an anchor.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The sub-4% headline and core inflation points towards comfortable trends in the near term. While softening crude oil prices and the cap on the weakening rupee remain a tailwind, we continue to monitor the impact of adverse monsoons on food inflation. For now, we continue to expect 50 basis points of rate hike beginning in October.”
SREEJITH BALASUBRAMANIAN, SENIOR ECONOMIST, BANDHAN AMC, MUMBAI
“The impact of the West Asia conflict will be more visible in CPI in the coming months, given recent higher WPI readings (8.3% y/y in April and likely 9%+ in May), pass-through pressure from higher oil and non-oil input costs, and supply chain disruptions.
Impact on monsoon rainfall and Kharif season crop sowing from a widely expected El Niño this year, is another major factor. Potential resolution of the West Asia conflict and normalization of shipping across the Strait of Hormuz are positives to keep tabs on.”
VIKRAM CHHABRA, SENIOR ECONOMIST, 360 ONE ASSET, MUMBAI
“The pass-through of higher energy and raw material costs to consumers has started to push headline inflation higher, and the risks to the inflation trajectory have intensified with the prospect of a weak monsoon.
We expect inflation to approach 6%, the upper end of the RBI’s tolerance band, by the end of this calendar year. This complicates the RBI’s policy choices. That said, with expectations of a resolution in West Asia gaining ground and crude below $90, we expect the RBI to stay on pause in the near term.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“May inflation came in slightly below consensus. While a build-up in price pressures is being watched closely against the backdrop of the ongoing West Asia conflict, India’s inflation is at still below the mid-range of the 2-6% target, and thereby less of an immediate policy concern.
This is consistent with the central bank’s view that current inflation readings remain manageable. However, policymakers continue to closely monitor upcoming inflation prints as higher input costs gradually filter through from downstream industries to consumers, weather-related risks unfold, and the progress of the monsoon season becomes clearer.”
GARIMA KAPOOR, DEPUTY HEAD OF RESEARCH & ECONOMIST- INSTITUTIONAL EQUITIES, ELARA SECURITIES (INDIA), MUMBAI
“CPI inflation for May came a tad below expectations despite the pass-through of high fuel prices and elevated food prices. With recent measures announced by the RBI and the government amid the likely expected resolution of the West Asian crisis, the macroeconomic backdrop has turned less adverse. We see inflation averaging 5.2-5.3% in fiscal 2027 and see the RBI hiking rates by 50 basis points in the second half of fiscal 2027.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“We estimate inflation at 5.2% for fiscal 2027, with headline likely to cross 6% in the third-quarter of FY27. Apart from elevated energy prices, El Nino-related disruptions also pose upside risks to the inflation outlook ahead.”
(Reporting by Chandini Monnappa, Urvi Dugar, Saikeerthi, Anuran Sadhu, Vijay Malkar and Nishit Navin in Bengaluru)
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