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India CPI at 3.93%: Why the next six months look tougher
CPI jumped 45 bps to 3.93% in May. Three economists see 6% in play over six months. Urban inflation is the new pressure point.
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India's retail inflation hit 3.93% in May, up from 3.48% in April, the National Statistics Office reported Friday. The 45-basis-point jump was the biggest monthly move in over a year, and economists across three firms said the pressure is not done yet.
Dipti Deshpande, Principal Economist at Crisil, pointed to the West Asia conflict starting to hit household budgets. Crisil sees CPI averaging 5.1% this fiscal, more than double last year's 2.0%, with risks from fuel prices, a weaker rupee, second-round effects, and potentially weak rainfall.
Sujan Hajra at Anand Rathi Group said the May spike was largely expected but warned both food and fuel inflation will keep rising. His call: headline CPI could breach 6% at some point over the next six months. Even so, he expects the Reserve Bank of India to hold off on a decisively hawkish stance as long as core inflation stays anchored around 4% and the pressure does not become broad-based.
Debopam Chaudhuri, Chief Economist at Piramal Group, flagged a split in the data. Urban inflation is accelerating faster than rural. That could erode purchasing power among city households and weigh on discretionary consumption, she said.
One sector that is not adding to the pressure: housing. Vivek Rathi, National Director-Research at Knight Frank India, said housing inflation has stayed moderate and the real estate sector has not become a significant source of price pressures in the economy.
The read-through for equities is uneven. Consumer staples and discretionary names face margin pressure if urban demand softens, while real estate developers get a pass on the inflation front. The bigger variable is the RBI. If headline CPI does hit 6%, rate-cut expectations for late 2026 will fade, which would hit rate-sensitive sectors like banks and auto. For now, the consensus among the three economists is that the central bank watches core inflation, not the headline spike, before moving.
The next data point to track is the June print, due mid-July. If food inflation does not moderate with the monsoon, the 6% breach Hajra flagged becomes the base case.