Retail inflation creeps up to 3.93% as food, fuel pass‑through bites households

New Delhi: The retail inflation inched up to 3.93 percent in May from 3.48 percent in the preceding month due to higher food prices, as the impact of rising global energy prices began to affect domestic retail petrol and diesel rates, impacting input costs.

Consumer Price Index (CPI) based inflation in the food basket was 4.78 percent in May, higher than 4.2 percent in April, according to the National Statistics Office (NSO) data.

Follow The PSUWatch Channel on WhatsApp

The Reserve Bank of India (RBI), which mainly factors in CPI while arriving at its monetary policy, has been mandated by the government to ensure the headline inflation remains at 4 percent with a margin of 2 percent on either side.

Precious metal jewellery, tomato, ginger, and raisin (kishmish) and monacca were the five items with higher inflation in May, according to NSO data.

On the other hand, potato, peas, motor car and jeep, cumin (jeera) and 'motorcycle and scooter' were the top 5 key items with low inflation at the all-India combined level in May 2026.

Last week, the RBI raised the inflation projection for the current fiscal to 5.1 percent from 4.6 percent, largely due to mounting input costs, triggered by the pass-through of higher global energy prices to retail rates of petrol and diesel.

Since May, retail fuel prices have been raised cumulatively by 7.4 percent for petrol and 8.4 percent for diesel.

The increase implies a direct impact of about 36 basis points on headline inflation, which, along with second-order effects, would be reflected in consumer price inflation (CPI) in the coming months, the RBI said in its monetary policy statement.

According to the NSO data, urban inflation was below the national average of 3.93 percent in May, while it was at 4.25 percent in rural India.

Among states, the highest inflation was in Telangana (6.15 percent) and the lowest in Mizoram (1.03 percent).

Commenting on the CPI data, Dipti Deshpande, Principal Economist, Crisil, said inflation rose in May, led by broad-based pressures from food and non-food segments, with the latter contributing more significantly.

"Rising input costs for producers, reflected in the Wholesale Price Index inflation of 8.3 percent in April, are now increasingly feeding into consumer prices. The impact of the West Asia conflict, which has now entered its fourth month in June, is therefore starting to percolate household budgets," she said.

President of industry body Assocham, Nirmal K Minda, said that inflation at 3.93 percent for May 2026 remains in benign conditions, even though global headwinds escalated and crude oil prices witnessed a spike.

The supply-side measures and the relatively lower pass-through of the impact of high crude oil prices to consumers have supported these benign inflationary conditions, he said.

"Going ahead, we expect the inflation trajectory to remain within the RBI’s target band, supporting our economic growth and providing room for the RBI to maintain the status quo in the coming policy review too," Minda added.

Follow PSU Watch on LinkedIN

Megha Arora, Director, India Ratings and Research, said geopolitical tensions and El Nino conditions continue to remain upside risks to inflation.

"Though crude prices today eased following the news of an agreement between Iran and the US. However, it will take time for crude prices to move towards USD70/bbl, closer to pre-West Asia conflict level," she said.

The rating agency expects the RBI to hold rates in the August 2026 monetary policy review. The key indicators to monitor include currency and liquidity, besides the crude oil price.

On the May numbers, Rajeev Sharan, Head of Research, Brickwork Ratings, said the inflation print is broadly in line with expectations, but the rise in food inflation to 4.78 percent underscores persistent price pressures in perishables, particularly tomatoes, ginger and other vegetables.

Geopolitical tensions and higher crude oil prices likely added to transport, logistics and input costs, while moderation in several other categories helped prevent a sharper spike.

"Overall, May’s print reflects a gentle re-acceleration in inflation, shaped by both weather-related food volatility and imported cost pressures, even as core categories continue to provide an anchor," Sharan added.

NSO under the Ministry of Statistics and Programme Implementation collects real-time price data from selected 1,407 urban markets (including online markets) and 1,465 villages covering all States/UTs.

(PSU Watch is India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy. 👉 Click to join our channel now: PSUWatch WhatsApp Channel. Prefer LinkedIn? Follow PSU Watch on LinkedIN. Click to stay connected on Twitter here and stay updated.)