India Watch: May CPI Preview: Food/fuel prices to push CPI above 4% in May

Research evidence excerpt

India Watch: May CPI Preview: Food/fuel prices to push CPI above 4% in May

s Survey

may stay elevated for a while as extreme heat is damaging produce in transit, prompting k: thousand

retailers to keep prices high despite cooling wholesale rates. Higher fuel costs, below- mom: month over month

normal rainfall risks, and likely heatwaves in June add further upside pressure.

nsa: non-seasonally adjusted

Core inflation likely at 4%, fuel price hikes to provide push MoSPI: Ministry of Statistics and

Core inflation is expected to rise to 4% yoy in May after remaining sticky at 3.7% for Programme Implementation

four months. The incremental rise in price of commercial LPG cylinders in May continues RBI: Reserve Bank of India

to impact prices of restaurant/ accommodation services (+1.4% mom). Higher gold REER: real effective exchange rate

prices in May will likely add to the upside price pressures. We also expect to see an sa: seasonally adjusted

increase in transportation prices (+ 5% mom) on account of high air fares coupled with TOP: tomato, onion, potato

fuel price hikes. Meanwhile, services’ inflation is expected to remain relatively subdued. WPI: Wholesale Price Index

IMD lowers monsoon outlook; stronger starting points to yoy: year over year

provide buffer LPA: Long Period Average

SW: Southwest monsoonAs per IMD's latest long-range forecast, rainfall is expected to be ~90% of its LPA with a

model error of ± 4%, lowering the estimate from 92% given in April this year. Rainfall in IOD: Indian Ocean Dipole

June is expected to be below normal at 92%. In our view, this signifies that rainfall is

likely to be below par going into July-Aug as well which are the critical months for

agriculture and sowing activity. Further, IMD predicts that El Niño conditions are likely to