New Delhi, June 12 (IANS) The moderation of headline retail inflation below 4 per cent reflects the resilience of India’s macroeconomic fundamentals and the effectiveness of ongoing efforts to maintain price stability, industry chamber PHDCCI said on Friday.

Retail inflation, measured by the Consumer Price Index (CPI), stood at 3.93 per cent in May (year-on-year), remaining below the Reserve Bank of India’s medium-term target of 4 per cent despite a modest increase from 3.48 per cent in April.

The latest data indicate that inflation remains broadly contained, supported by moderation in several core consumption categories. Food inflation (year-on-year) rose to 4.78 per cent in May from 4.20 per cent in April, driven primarily by higher prices of tomatoes, ginger, and certain dry fruits.

However, substantial declines in prices of potatoes, peas, and selected consumer durables helped moderate overall inflationary pressures.

“While food prices remain subject to seasonal fluctuations, inflation across broad level continues to remain contained, supporting household purchasing power,” said Rajeev Juneja, President, PHDCCI.

While Kharif crops such as tomato and Ginger show high inflation rates in May, the prices of motor car and jeep and motorcycle and scooter have shown a stark decline in the same time period.

Continued improvement in supply chains, stable energy prices, and favourable domestic economic conditions is expected to support inflation management efforts in the coming months, said PHDCCI.

“The short-term inflation outlook looks benign due to continued vigilance by the government on food-price developments, coupled with favourable agricultural production, improving supply conditions, and stable macroeconomic policies,” said Dr. Ranjeet Mehta, SG and CEO, PHDCCI.

According to Dipti Deshpande, Principal Economist, Crisil, CPI inflation is expected to rise to an average 5.1 per cent this fiscal, from 2.0 per cent last fiscal, with risks from higher fuel prices, currency depreciation, second-round effects and potentially weak rainfall.

“The Reserve Bank of India will likely look through these supply-side shocks while keeping a close watch on inflation expectations,” said Deshpande.

–IANS

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