Retail inflation accelerated in May to 3.93 per cent compared to 3.48 per cent in the preceding month due to higher food prices. According to official data released on Friday, consumer Price Index-based inflation in the food basket was 4.78 per cent in May, higher than 4.2 per cent in April. Precious metal jewellery, tomato, ginger, raisin (kishmish), and monacca were the five items with the highest inflation. On the other hand, potato, peas, motor car and jeep, cumin (jeera) and ‘motor cycle and scooter’ were the top five items with low inflation at the All India combined level in May, 2026.
“May inflation came in slightly below consensus. Contribution from the food segments likely rose on perishables (including vegetables), edible oils, cereals, pulses, milk and related categories, not helped by heatwave conditions in some parts of the country. Concurrently, pump fuel prices were increased in a staggered fashion since mid-May, besides higher CNG and commercial LPG (this month), imparting first and second derivative impact through the coming months,” said Radhika Rao, Senior Economist & Executive Director, DBS Bank.
Housing inflation rate
Year-on-year (YoY) housing inflation rate for the month of May, 2026 is 2.12 per cent, and the corresponding inflation rates for rural and urban are 2.73 per cent and 1.91 per cent, respectively.
The Reserve Bank of India (RBI), which mainly factors in CPI when arriving at its monetary policy, has been mandated by the government to ensure that headline inflation remains at 4 per cent, with a 2 per cent margin on either side.
Last week, the RBI raised its inflation projection for the current fiscal to 5.1 per cent from 4.6 per cent, largely due to mounting input costs, driven by the pass-through of higher global energy prices to retail petrol and diesel prices.
Retail fuel prices
Since May, retail fuel prices have been raised cumulatively by 7.4 per cent for petrol and 8.4 per cent for diesel.
The increase implies a direct impact of about 36 basis points on headline inflation, which, along with second-order effects, would be reflected in consumer price (CPI) inflation in the coming months, the RBI said in its monetary policy statement early this month.
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