Retail inflation in India increased to 3.9% in May, its highest level since January 2025, but stayed below the Reserve Bank of India's (RBI) target of 4%. The numbers could have been higher, except for a statistical quirk in collecting petrol-diesel-LPG price data.
The Consumer Price Index (CPI) grew at 3.93% in May 2026, marginally lower than a Bloomberg economist poll prediction of 4.02%. Core inflation expanded 3.7% in May, up from 3.4% in April.
Food and beverages part of the CPI basket grew at 4.6% in May compared to 4% in April. RBI's Monetary Policy Committee expects CPI to grow at 4.2% in the quarter ending June and 5.1% in the fiscal year 2026-27.
However, the inflation seen in official data and that being felt in the economy could be different, with the latter being higher than the former. This is due to a statistical quirk in how the National Statistics Office collects data for three critical items: petrol, diesel, and LPG.
The hike in petrol-diesel prices due to the West Asia war last month meant that the retail price of petrol and diesel on May 31 was 6.9%-7.8% and 7.7%-8.7% higher across four metro cities than last year.
Restaurant and accommodation services, which has a 3.3% weight in the CPI, is one of the divisions seeing a quick uptick in inflation. Inflation in this division was between 2.7%-2.8% from January to March, but inched up to 4.2% in April and 5.8% in May.
