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India's retail inflation stood at 3.93 per cent in May, remaining below the Reserve Bank of India's medium-term target of 4 per cent, according to provisional data released by the Ministry of Statistics and Programme Implementation on Friday. 

However, it slightly inches up from 3.48 per cent recorded in previous month (April). The inflation data cannot be compared with the corresponding period last year due to the rebasing of the CPI basket, which now uses 2024 as the base year.

The revised series was introduced in January based on consumption patterns captured in the 2023-24 Household Consumption Expenditure Survey.

The continued rise in inflation suggests that price pressures are beginning to emerge after a relatively benign start to the year.

Economists have pointed to elevated crude oil prices and ongoing geopolitical tensions in West Asia as key factors contributing to concerns over imported inflation.

In its June monetary policy review, the RBI revised its inflation forecast for FY27 to 5.1 per cent from 4.6 per cent earlier, citing risks from a potentially below-normal monsoon linked to El Nino conditions and higher global energy prices.

The central bank kept the benchmark repo rate unchanged at 5.25 per cent on June 5. The six-member Monetary Policy Committee unanimously voted to maintain the status quo and retain a neutral policy stance, signalling a cautious approach as it assesses the impact of rising oil prices and global uncertainties on the domestic economy.

The conflict in West Asia has also added pressure on the Indian economy by affecting currency markets and raising concerns about stagflation.

However, India's economic growth has remained resilient, with GDP expanding 7.8 per cent in the fourth quarter and 7.7 per cent for the full FY26.

Food prices continue to play a crucial role in determining headline inflation, given their significant weight in the CPI basket.

Since June 2025, food inflation had remained in negative territory, helping drive overall retail inflation to historic lows.

In October last year, headline CPI inflation had fallen to a record low of 0.25 per cent, supported by food inflation of minus 5.02 per cent.