In May 2024, the Finance Ministry’s monthly economic report projected that inflation would hover around 13.5-14.5%, expecting a decrease to 12.5-13.5% by June 2024. This projection aligns with estimates from MG Research, which suggests that inflation is likely to ease to 13.9% in May.
The anticipated decrease in inflation for May 2024 is attributed to several factors. Firstly, the report points to elevated inflation levels in the previous year and improvements in the domestic supply chain of perishable items and staple foods like wheat. Additionally, reductions in transportation costs have contributed to the downward trajectory of inflation.
The government’s commitment to curbing inflation through stringent administrative measures is highlighted as a key driver in improving the inflation outlook. The report emphasizes the importance of bolstering the availability of food items as a crucial strategy for taming inflationary pressures. By effectively managing supply and demand, the government aims to stabilize prices and reduce market volatility.
Furthermore, the drop in petroleum product prices in May 2024 has positively impacted the Consumer Price Index (CPI) for the month. Lower fuel prices have led to reduced transportation costs, contributing to a favourable trend in the CPI.
The Sensitive Price Index (SPI) has also recorded a decline for the sixth consecutive week, which bodes well for the CPI outlook. In April 2024, the CPI inflation stood at 17.3% on a year-on-year basis, marking a significant decrease from the 36.4% recorded in April 2023.
Key drivers of inflation include housing, water, electricity, gas & fuel, perishable food items, furnishing & household equipment maintenance, clothing & footwear, and transport. Notably, during July-April FY 2024, the CPI stood at 26.0% against 28.2% in the same period the previous year. On a month-on-month (MoM) basis, there was a decline of 0.4% in April 2024, compared to an increase of 1.7% in the previous month.
