Retail Food Inflation Rises 9.28% in May

The government withheld the headline retail inflation figures for May, as it did for the prior month as well due to the lack of data owing to lockdown restrictions.

However, retail food inflation saw a year-on-year rise to 9.28%. Retail inflation was at 3.05% in May 2019.

As per the previous month’s release, price movement data from the National Statistical Office found that food inflation was 8.76% in March while headline retail inflation was recorded at 5.84% for that month.

“The truncated index showed that price pressures in food components softened in May, as fresh crop hit the market for cereals and pulses. While normalisation in vegetables continued, inflation in oils and fats and non-alcoholic beverages notched a tad higher,” said Rahul Bajoria, Chief India Economist, Barclays.

As per Aditi Nayar, principal economist at ICRA, the double-digit inflation levels for pulses, meat and fish, and oils and fats in May were a cause of concern, while prices of other subgroups moderated month-on-month.

“In particular, vegetable prices corrected appreciably in May 2020 relative to the previous month, suggesting an easing of supply disruptions, amid low demand from the restaurants and hotels segment,” Nayar said.

Food and beverages inflation eased in May from April. Data for certain groups and sub-groups in the basket of items of the consumer price and consumer food price indices (CPI and CPFI) were unavailable, the release said. These included ‘prepared meals, snacks, sweets etc.’ and ‘clothing and footwear’.

Continuing the trend from the previous month, the NSO released only limited data where it had received enough inputs to be able to draw inferences.

Whereas it collects price data from selected 1114 urban markets and selected 1181 villages through personal visits by field staff, it only received data from 987 urban markets and 836 villages, for commodities which were available and being transacted during the month of May.

“It is, however, observed that transactions were largely focused on essential purchases,” the office said.

Nayar expected higher inflation in June on account of rising crude oil prices, even as they were below yearago levels. Barclays expects retail inflation to average 4% in FY21.

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