India’s retail inflation came down to 7.04% in May on account of softening prices of food, government data showed on Monday. In April, retail inflation had shot up to 7.79% – the highest in eight years.
Despite the decline in inflation numbers, the price rise indicator remained above the limit prescribed by the Reserve Bank of India for the fifth straight month. The central bank aims to keep retail inflation in the range of 2% to 6%.
Food inflation in May was 7.97%, as compared to 8.38% in the previous month. Price rise in food items was higher in urban areas (8.20%) as compared to rural areas (7.76%).
Among food items, price rise was highest for vegetables (18.26%), followed by oils and fats (13.26%) and spices (9.93%) in May.
On June 8, the Reserve Bank of India had increased the inflation forecast for the financial year 2022-’23 to 6.7% from its earlier estimate of 5.7%.
The central bank said it expects the retail inflation to be at 7.5% in the first quarter (April-June), 7.4% in the second (July-September), 6.2% in the third (October-December) and 5.8% in the fourth quarter (January-March) of this financial year.
Last week, the RBI also increased the repo rate by 50 basis points to 4.90% in an attempt to control inflation. This was the second hike in the repo rate within five weeks.
Repo rate is the interest rate at which the central bank lends to commercial banks. The reverse repo rate, on the other hand, allows banks to deposit funds with the central bank and earn interest on them.