India’s retail inflation accelerated to 3.93 percent in May, up from 3.48 percent in April, according to data released by the National Statistics Office (NSO) on Friday, with economists attributing the rise to broad-based pressures across both food and non-food categories.
While the increase was largely in line with expectations, experts cautioned that inflationary pressures could intensify in the coming months, driven by higher fuel costs, geopolitical tensions, and currency movements.
According to Dipti Deshpande, Principal Economist at Crisil Ltd, the impact of the ongoing conflict in West Asia is beginning to filter through to household expenses.
“Crisil expects CPI inflation to rise to an average 5.1% this fiscal, from 2.0% last fiscal, with risks from higher fuel prices, currency depreciation, second-round effects and potentially weak rainfall,” she said.
Deshpande’s outlook reflects concerns that elevated crude oil prices and supply-side disruptions could gradually feed into broader consumer prices.
Sujan Hajra, Chief Economist and Executive Director at Anand Rathi Group, said the more than 40 basis-point increase in May inflation had been widely anticipated.
He warned that both food and fuel inflation are likely to remain on an upward path.
“Our assessment is that headline retail inflation could breach 6% at some point over the next six months,” Hajra said.
However, he added that the Reserve Bank of India may avoid adopting an aggressively hawkish policy stance as long as core inflation remains anchored near 4 percent and pricing pressures do not spread across the wider economy.
The impact of rising prices may not be evenly distributed.
Debopam Chaudhuri, Chief Economist at Piramal Group, noted that urban inflation is rising faster than inflation in rural areas.
“This could further erode purchasing power among urban households and weigh on discretionary consumption demand,” she said.
The trend could affect spending on non-essential goods and services, particularly among middle-income consumers already facing higher living costs.
From a real estate perspective, the outlook remains relatively stable.
Vivek Rathi, National Director of Research at Knight Frank India, said housing-related inflation continues to remain moderate and has not emerged as a significant contributor to overall price pressures.
“The sector has not become a significant source of price pressures in the economy,” he said.
Rathi added that developments in global commodity markets and domestic inflation expectations will play an important role in shaping the broader macroeconomic environment and influencing the future trajectory of interest rates.
Although inflation remains below the Reserve Bank of India’s upper tolerance threshold of 6 percent, economists increasingly expect upward pressure on prices to persist through the remainder of the fiscal year, with energy prices, weather conditions, and geopolitical developments likely to determine the pace and extent of the rise.
