India’s consumer price inflation ticked up to 3.05% in May, highest in the last seven months, from revised number of 2.99%, in April, 2019. The acceleration in the inflation was largely due to rise in pulses (2.13% in May from deflation of 0.81% in April) and vegetable prices (5.46% in May vs. 2.87% in April) resulting into overall food inflation accelerating to 1.83% in May, as compared to 1.10% in the previous month. Food inflation could pick up further in coming months if there is shortfalls in rain during this monsoon season. The core inflation declined to 4.2% in May from 4.5% in April, 2019 due to weak domestic demand in the Indian economy.
In spite of marginal increase in headline inflation, it stayed below RBI’s medium term target of 4% for ten consecutive months. Given the subdued inflationary pressure, lower manufacturing PMI in May and slowing economic growth, RBI had lowered its repo rate by 25bps to 5.75% in the last MPC meet in June, third consecutive rate cut since February, 2019.
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