Retail inflation for May falls to lowest level in over 2 years; factory output rises

In some good news coming in for the economy, retail inflation in the month of May has fallen to its lowest level in 25 months. Meanwhile India's factory output or Index of Industrial Production (IIP) went up sharply to 4.2% in April versus 1.1% in March.

May CPI (Consumer price index) has come in at 4.25% versus 4.7% in April. Prices of vegetables have marked decline leading to overall food inflation coming in at 2.91%.

However, inflation still remains slightly above the Reserve Bank of India's target of 4%. In the recent credit policy announcement on the 8th of June, the RBI monetary policy committee left the repo rate unchanged for the second time in a row. However, RBI Governor Shaktikanta Das had said that withdrawal of accommodation stance has been maintained and further monetary action will be taken promptly as required.

The governor also warned that although inflation has moderated but pressures remain, that could surface during the second half of the year. RBI's inflation forecast for FY24 is 5.1%, slightly lower than the earlier projection of 5.2%.

Since May 2022, the repo rate has been raised by a total of 250 basis points to bring inflation under control.