India's consumer price inflation for May might drop to 7.01%: CNBCTV-TV18 poll

The Consumer Price Index (CPI) inflation data for May will be released at 5:30 pm on Monday. A CNBC-TV18 poll estimates India’s May CPI to ease from an eight-year high of 7.79 percent in April and be closer to 7.01 percent. The core CPI is estimated at 6.2 percent versus 7 percent month-on-month.

The drop is expected even as global macros look worrisome, with the US May CPI coming in much higher than expected at 8.6 percent — the fastest increase since 1981. The very high 0.63 percent month-on-month (MoM) increase in core inflation was another surprise.

US consumer price index is a closely watched inflation gauge. The US Fed has already signalled its plans for big increases in the benchmark borrowing rate, due on Wednesday and next month. However, chances are rising that the Fed might have to be even more aggressive. The Fed doesn't have great options and is reluctant to entertain 75 basis-point hikes.

As per the CNBC-TV18 poll, the inflation in the food basket is expected to plunge to 8.1 percent for May from 8.3 percent the previous month. However, the range for both CPI and Core CPI is wide. The range for CPI is expected to be between 6.86 percent and 7.27 percent. The range for core CPI is expected to be between 5.8 percent and 6.7 percent.

The State Bank of India (SBI) has estimated that inflation is likely to stay higher than 7 percent till September.

In April, the CPI was at an eight-year high mainly due to food inflation spiking month-over-month. Also, the April IIP was high due to the low base in April 2021, which saw a deadly COVID-19 wave driven by the Delta variant. The consumption of goods is likely to be sequentially higher.

The inflation based on CPI was 6.95 percent in March this year and 4.23 percent in April 2021.

The retail inflation has remained above 6 percent since January 2022. The Reserve Bank of India (RBI) has been mandated by the government to ensure that inflation remains at 4 percent with a margin of 2 percent on either side.