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India’s Retail Food And Beverage Inflation Eases To Seven Month Low In May

Due to data collection issues amid lockdown, the government has not released the headline CPI inflation data for April and May.

Customers wearing protective masks shop at a grocer’s during a lockdown imposed due to the coronavirus in Mumbai, India, on Sunday, April 5, 2020. Photographer: Dhiraj Singh/Bloomberg
Customers wearing protective masks shop at a grocer’s during a lockdown imposed due to the coronavirus in Mumbai, India, on Sunday, April 5, 2020. Photographer: Dhiraj Singh/Bloomberg

India’s retail food inflation cooled in May as supply-side disruptions eased with the economic activity resuming gradually.

Food and beverage inflation stood at 7.4% in May compared to 8.6% in April, according to data released by the Ministry of Statistics and Programme Implementation. The consumer food price index, which includes pan, tobacco and intoxicants, rose by 9.28%.

Due to data collection issues, the department didn’t release the headline CPI inflation data for April and May. A Bloomberg poll of 33 economists had estimated headline inflation at 5.5% for May.

The Monetary Policy Committee expects the headline inflation to fall to its 4(+/-2)% target in the third and fourth quarters of the ongoing financial year through March, though supply dislocations continue to add to uncertainty for the near-term outlook.

In the absence of fieldwork for price collection due to the nationwide lockdown, data was largely collected over telephone, supplemented by information collected by field staff for items being sold at neighborhood outlets, the statistics department said. It released data for the commodities for which inputs were available from at least 25% of the markets, accounting for more than 70% share of sales.

Inflation Internals

  • Vegetables inflation stood at 5.3% in May against 23.6% in April 2020.
  • Inflation in pulses stood at 7.4% in May, after rising to 22.9% in the previous month.
  • Cereals inflation was 7.4% in May compared with 7.8% in April.
  • Milk and milk product prices rose 8.8% in May, against an increase of 9.4% in April.

The truncated index showed that price pressures in food components softened in May, as fresh crop hit the market for cereals and pulses, said Rahul Bajoria, chief India economist at Barclays. Overall, a favourable monsoon and sharp decline in demand will likely be the dominant drivers of inflation over the coming months, he added.

Beyond food items, the statistics department reported data for housing and fuel. Housing inflation stood at 3.7% in May against 3.9% in April. Health inflation rose to 4.3% from 2.8% last month. Fuel prices rose 1.4% in May on an annual basis. The data for April was not released.