Indian Rupee

India’s May inflation eases for 5th month straight

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The annual consumer inflation rate in India eased to 4.67% last month from 4.83% in April, to mark the slowest increase in consumer prices in one year, data published by the National Statistical Office showed.

Economists had expected annual inflation to be at 4.8%, according to a consensus compiled by FactSet.

It was the ninth consecutive month that Indian inflation remained within the Reserve Bank of India’s (RBI) tolerance range of 2-6%, one among multiple conditions necessary for the central bank to deliver rate cuts this year.

Prices slowed for housing (2.56% vs 2.68% in April) and clothing and footwear (2.74% vs 2.85%). Nonetheless, food price inflation remained strong at 8.69% in May, almost in line with the 8.70% rise in April. This was mainly attributed to a 27.33% surge in vegetable prices. For cereals and pulses, which constitute a significant portion of India’s staple diet, the inflation rate came in at 8.69% and 17.14% respectively.

On the other hand, costs for fuel and light decreased by 3.83% (vs 4.24%).

On a monthly basis, Indian consumer prices rose by 0.48% in May for a second consecutive month.

Last week, the RBI kept its benchmark policy repo at 6.5% for the eighth consecutive meeting, as widely expected and pledged to maintain the disinflationary stance until inflation aligns with the target on a durable basis amid faster economic growth. The RBI also held the marginal standing facility (MSF) and bank rates unchanged at 6.75% while keeping the standing deposit facility (SDF) rate at 6.25%.

Additionally, the central bank revised the economic growth forecast for the fiscal year 2025 to 7.2% from 7%, with a projection of 7.2% for Q2; 7.3% for Q3; and 7.2% for Q4, while maintaining inflation expectations at 4.5%, with a projection of 4.9% for Q1; 3.8% for Q2; 4.6% for Q3, and 4.5% for Q4.

Commenting on the decline in CPI inflation, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, told The Economic Times: “From the stock market perspective this is good news which can further strengthen the bullish trend being witnessed in the market now.”