India's retail Inflation in May expected to ease below 5% from November: SBI Research

India's retail inflation, as measured by the Consumer Price Index (CPI), is projected to remain slightly above 5 per cent till May before declining towards 3 per cent in July, according to a report by SBI Research. However, the inflation rate is expected to stay below 5 per cent beginning November till the end of the financial year 2024-25, as per ANI.

The report comes as India's retail inflation eased marginally to 5.09 per cent in February from 5.10 per cent in the previous month, due to the deceleration of prices in all categories except food. Within the food segment, protein items like meat and eggs witnessed a significant surge in inflation, ranging between 400-500 basis points, compared to January. Vegetable prices also increased by 300 basis points month-on-month to 30.2 per cent, the report added.

"With moderate fuel prices, inflation is currently being driven by food price dynamics. Looking ahead evolving food prices will determine domestic inflation," SBI Research said in its Ecowrap report, ANI added.

The report suggested that the Department of Consumer Affairs publish a detailed list of vegetable prices other than just tomato, onion, and potato. "This will make it easier to fathom the direction of vegetable price impact on CPI (retail inflation)," it stated, as quoted by ANI.

While India's retail inflation remains within the Reserve Bank of India's (RBI) 2-6 per cent comfort level, it is above the ideal 4 per cent scenario. The RBI has raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 to combat inflation.

"Based on all the scenarios, the current repo rate at 6.5 per cent looks ideal. We can expect the first rate cut only in Q2FY25," the report added.

Meanwhile, the Indian rupee dropped on Wednesday on the back of weakness in most Asian peers after U.S. inflation data topped expectations, but most market participants said the decline was likely a blip.

(With Inputs from ANI)