New Delhi: India’s retail inflation dipped further to a 25-month low of 4.25 per cent in May, primarily on account of falling food prices. The drop in retail inflation is in line with what economists had predicted.

The sharp drop in retail inflation in May was on account of a drop in food prices

This brings the consumer price index-based (CPI) based inflation closer to the Reserve Bank of India’s (RBI) medium-term target of 4 per cent. It may be noted that retail inflation has remained within RBI’s comfort zone for the third successive month.

The sharp drop in retail inflation in May was on account of a drop in food prices. Food inflation, which accounts for nearly half of the consumer price index (CPI) basket, eased to 2.91 per cent in May.

Meanwhile, rural inflation stood at 4.17 per cent in May while urban inflation came in at 4.27 per cent.

The development comes as a relief for the central bank, which kept key rates unchanged in its last policy review. The central bank is likely to pause its rate hikes for the remainder of the year.

At the same time, economists highlighted that the trend of easing inflation could see a turnaround after May, depending on the impact of El Nino on the monsoon.

RBI Governor Shaktikanta Das said last week that there is a need to monitor the inflation situation closely, “especially as the monsoon outlook and the impact of El Nino remain uncertain”.

Meanwhile, the Index of Industrial Production (IIP) — a measure of industrial output — increased in April to 4.2 per cent from 1.1 per cent in March, according to government data.