New Delhi: Consumer price inflation accelerated at the fastest pace in 21 months in May, data released on Monday showed, darkening India’s macroeconomic outlook.

The Consumer Price Index (CPI) rose 5.76% in May, from a revised 5.47% in April, mainly because of an increase in food prices.

The uptick came against the backdrop of a contraction in factory output in April and reports that global growth would be even lower than projected earlier.

Effectively, not only does it rule out any policy rate cuts by the Reserve Bank of India (RBI), it also puts the spotlight on the structural challenge of the supply chain in agriculture causing cyclical demand-supply mismatches in food items.

May retail inflation accelerated faster than the estimate of 5.52% in a Reuters poll of economists.

Food inflation rose sharply in the month to 7.55% from 6.4% a month ago, with vegetable price inflation touching double digits at 10.77% against 4.82% in April. Price of pulses and sugar rose 31.57% and 14% respectively, while those of meat and fish and egg continued to accelerate by 8.67% and 9.13% respectively.

Food inflation in rural India outpaced that in urban India, accelerating to 7.75%. In the cities, food prices rose 7.24%.

Last week, RBI warned against rising inflation in its monetary policy review while leaving policy rates unchanged. The central bank and the government have set a target of reining in retail inflation to 5% by March 2017.

The Krishi Kalyan cess of 0.5% to build rural infrastructure in India, which kicked in from 1 June on all taxable services, is expected to add to inflationary pressure, along with the recent hikes in petrol and diesel prices.

Yet, despite the second consecutive upside surprise in CPI-based inflation, it is too early to rule out further monetary easing in 2016, said Aditi Nayar, senior economist at Icra Ltd.

“From August 2016 onward, we expect food inflation to soften on account of a number of factors, including a favourable base effect. Moreover, incoming data on the distribution of rainfall and pace of sowing may dampen food inflation," she added.

The south-west monsoon hit the Kerala coast on 8 June, a week later than expected. Though it advanced steadily into the rest of the southern states, weak cyclonic circulation over the Arabian sea has delayed the onset of monsoon in western India by a few days.

The monsoon is critical to the kharif crop as over half of India’s farmland lacks assured irrigation and the country receives 80% of its annual rainfall during the four months starting in June.

While sub-par rains dented foodgrain production in the past two years, the agriculture ministry, relying on forecasts of a good monsoon, has set a record foodgrain target of 270 million tonnes in 2016-17.

Sowing of rain-fed kharif crops has begun with the onset of the monsoon, the agriculture ministry said on Friday. According to preliminary reports received by the ministry from different states, farmers have so far planted 7.1 million hectares with crops such as rice, pulses, coarse cereals, oilseeds, sugarcane and cotton.

The seasonal area—or the total area where crops are planted during the entire kharif season—is 106.2 million hectares.

Although the area planted so far is lower than the 7.7 million hectares sown by this time last year, planting is expected to pick up as the monsoon progresses.

RBI, in its latest monetary policy review, said the inflation surprise in the April reading of 5.39%, revised up on Monday to 5.47%, makes the future trajectory of inflation more uncertain.

“The expectations of a normal monsoon and a reasonable spatial and temporal distribution of rainfall, along with various supply management measures and the introduction of the electronic national agriculture market (e-NAM) trading portal, should moderate unanticipated flares of food inflation. In addition, capacity utilization indicators suggest that the available headroom in industry could keep output prices subdued even as demand picks up," it said. RBI, however, cautioned of the upside risks. “Firming international commodity prices, particularly of crude oil; the implementation of the 7th Central Pay Commission awards which will have to be factored into projections as soon as clarity on implementation emerges."