India

India Inflation May 2024

India: Inflation hits one-year low in May

Inflation eased to 4.7% in May, cooling slightly from April’s 4.8% and below market expectations. May’s result represented the weakest inflation rate in a year. Looking at the details of the release, price pressures slowed for housing plus clothing and footwear. Meanwhile, food inflation was steady at April’s level in May and remained above headline inflation for the 11th straight month.

The trend was unchanged, with annual average inflation coming in at April’s 5.4% in May.

Finally, consumer prices rose 0.48% in May over the previous month, mirroring April’s reading.

Our panelists expect inflation to gradually come down ahead, largely on the Central Bank’s past hikes to interest rates. That said, inflation will remain above the midpoint of the Central Bank’s 2.0–6.0% target range through the end of our forecast horizon in 2028. Strong food pressures are expected to continue stoking prices ahead. Moreover, domestic demand remains robust, heating up services inflation. The main upside risk is adverse weather damaging crops and thus raising food prices further.

Aurodeep Nandi and Sonal Varma, economists at Nomura, commented:

“So far, high frequency data suggest headline inflation is likely to trend lower to ~4.3% y-o-y in June from 4.7% in May, partly reflecting a favourable base […]. Beyond June, favourable base effects will lower headline inflation (to sub-4%) in July-August, before rebounding higher from September onwards. Monsoon rains and input costs will be important drivers of inflation going forward. On average, we expect headline inflation to moderate from 4.8% y-o-y in Q2, to 3.9% in Q3 and then rise to 4.6% in Q4.”

On the monetary policy outlook, HSBC’s Pranjul Bhandari and Maitreyi Das said:

“Food prices hold the key for RBI action. If rains over June and July are strong, reservoirs fill back up, and sowing activity rises quickly, food inflation could fall over a 5-month horizon, opening up space for a shallow rate cut cycle. So far, rains started off well in June, but have slowed in recent days. We are watching this space carefully. If rains rise back up to normal/above-normal levels, the RBI could cut the policy repo rate as early as August.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest X Download Fullscreen