CPI Inflation Jumps To Above RBI's Comfort Band

Pallavi Nahata

@PallaviNahata

 Jun 14 2021, 5:52 PM IST Jun 14 2021, 7:47 PM IST

Consumer Price Index inflation rose to 6.3% in May 2021 compared to 4.23% in April, according to data released by the Ministry of Statistics and Program Implementation on Monday. On a monthly basis, the index rose by 1.65% as the gauge climbed to 160.4 in May from 157.8 in April.

Inflation in food and beverages rose to 5.24%, driven by oils and pulses. On a monthly basis, it rose 1.7% from April 2021.

A Bloomberg poll of economists had estimated inflation at 5.38% for May 2021. With the spike in inflation, it is now above the MPC target of 4(+/-2)%.

The 1.6% month-on-month uptick in the CPI in May 2021, which saw widening state level restrictions, is nearly as high as the 1.9% hardening seen in April 2020 during the nationwide lockdown, testing the assumption that supply disruptions have been limited in the second wave.

Aditi Nayar, Chief Economist, ICRA

Core Inflation, which excludes food, fuel and light, rose to 6.34% in May 2021 from 5.17% in April, according to Bloomberg Economics. This was the highest since July 2014.

The "massive 1.5% month-on-month uptick in May 2021is higher than the 1.0% rise in April 2020 amidst the lockdown", Nayar said. Core inflation is expected to remain above 5.0% throughout FY22, she added.