India’s retail inflation eased sharply to a 25-month low of 4.25% and falling below the Reserve Bank of India’s upper tolerance limit of 6% for the third consecutive month.

In April, consumer price index (CPI) inflation was at 4.7% while in the year-ago period it was at 7.04%.

The consumer food price index (CFPI) cooled to 2.91% in May from 3.84% in April. 

Rural inflation in May stood at 4.17% while urban consumers faced a slightly higher inflation at 4.27%, according to data released today by the Ministry of Statistics and Programme Implementation.

CPI inflation still remains above the RBI's medium-term target of 4% for 44 consecutive months.

“Going forward, inflation is expected to print below 5% again in June although moving higher from Q2 onwards," Sakshi Gupta, Principal Economist at HDFC Bank, said.

The impact of any El Nino disturbances, the higher minimum support price (MSP) increases and the late arrival of monsoons remain upside risks for the inflation trajectory going forward.

Aditi Nayar, chief economist at ICRA, believes rate cuts are still distant. “We expect an extended pause through 2023-24 and the stance to remain unchanged over the next couple of bi-monthly policy reviews,” she said.