Headline inflation in India eases to 7.0% in May 2022

Despite the drop, inflation still remained a full percentage point above RBI's upper target band
Despite the drop, inflation still remained a full percentage point above RBI's upper target band
Despite the drop, inflation still remained a full percentage point above RBI's upper target band

After accelerating for three straight months to 7.8% y/y in April, the headline inflation climbed down as the overall consumer price index grew by 7.0% y/y in May 2022. Despite the drop, inflation still remained a full percentage point above RBI's upper target band. A reduction in excise duty on fuel has helped in lowering not just the headline but has rippled through other miscellaneous items to lower core inflation by 0.9pp to 6.1% y/y. The inflation pertaining to fuel and light descended from 10.7% in April, to 9.5% in May. In addition, the growth of the consumer price index for food and beverages, which occupies the largest weight in the inflation basket, decelerated to 7.8% y/y in May, from 8.1% y/y in the previous month. The CPI for miscellaneous items forms the second-largest category following food and beverages, which underwent a sharp increase in April to 8.0% y/y, moderated as dramatically in May, to 6.8% y/y. The third-largest component, CPI for housing, continued to climb upwards, accelerating to 3.7% y/y in May, up by 0.2pp as compared to April. Clothing and footwear prices recorded the first deceleration on record since June 2020, as inflation lowered by 1.0pp, to 8.9% y/y.

Despite the drop, inflation still remained a full percentage point above RBI's upper target band

The easing in the inflation for food and beverages was caused by a deceleration in the CPI for cereals and products, to 5.3% y/y, from 6.0% y/y in the previous month. The inflation pertaining to oils and fats also saw a reduction by 4pp, to 13.3%. Other items which saw a moderation in their inflation were fruits, spices, sugar and confectionery, and non-alcoholic beverages. Pulses and eggs recorded a decline in their CPI. Among the main components of CPI for food and beverages, the CPI for vegetables increased by 18.3% y/y, accelerating by 3pp, while the pace of increase for milk and milk products was comparatively less pronounced, recording a growth of 5.6% y/y in May from 5.5% y/y in April.

Rural inflation reduced from 8.4% in April to 7% in May, recording substantial easing as compared to urban inflation, which remained virtually unchanged at 7.1%. Among the major states, the inflation levels were the highest in Telangana, at 9.5%, followed by Maharashtra and Andhra Pradesh, both at 8.5%. On the other end, Kerala was one of the states with the lowest inflation, at 4.8%, followed by Delhi at 5.6%, and Tamil Nadu at 5.7%.

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Further data and analysis on India’s economy are available on the CEIC India Economy in a Snapshot – Q2 2022 report.

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13th June 2022 Headline inflation in India eases to 7.0% in May 2022