CPI inflation accelerated to a 5.01 percent annual rate in May, matching expectations and retaining the relatively tight range seen since climbing back above the 5.0 percent mark in in January.
The headline gain was largely attributable to stronger prices in the rural sector where inflation weighed in at 5.52 percent after a 5.29 percent print last time. At 4.41 percent, the urban rate was much more stable and just 0.05 percentage points above its April mark.
Food inflation actually slowed significantly, from 5.11 percent at the start of the quarter to 4.80 percent last month but this was offset elsewhere within the overall CPI basket. Amongst the other major categories inflation stood at 6.12 percent in clothing and footwear and 4.64 percent in housing. Fuel and light was 5.96 percent and miscellaneous 3.85 percent.
Today's results should come as little surprise to the RBI although it will take close note of the increase in underlying prices. Having only just cut official interest rates the central bank seems to be in no hurry to ease again.
Consumer Price Indexes (CPI) measure changes over time in general level of prices of goods and services that households acquire for the purpose of consumption. The data are released for previous month and are not seasonally adjusted.
CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting and for monitoring price stability, and as deflators in the national accounts. CPI is also used for indexing dearness allowance to employees for increase in prices. CPI is therefore considered as one of the most important economic indicators.
CPI numbers presently compiled and released at national level for India reflect the fluctuations in retail prices pertaining to specific segments of population in the country -- industrial workers, agricultural labourers and rural labourers. These indexes do not encompass all the segments of the population in the country and as such do not reflect true picture of the price behavior in the country. To overcome the above, the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation has started compiling new series of CPI for the entire urban population or CPI (Urban) and CPI for the entire rural population or CPI (Rural), which reflect the changes in the price levels of various goods and services consumed by the urban and rural population.
Register for regular updates here and manage your email preferences.