India’s retail inflation touched four month high of 4.87 per cent in May. Fuel prices shot up during the month and food items such as fruits and vegetables turned costlier compared with the same month last year. Inflation in April was 4.58 per cent.
Fruit prices grew at a faster pace of 12.33 per cent in May while vegetables were costlier by 8.04 per cent. In the case of fuels, the inflation for the month worked out to 5.8 per cent.
Oil is India's biggest import item and an increase in oil prices pushes inflation up and widens the trade deficit, putting pressure on the rupee. So far in 2018, retail prices of petrol have climbed 9.2 per cent and diesel by 13.7 per cent.
The rupee depreciated 5.3 per cent since January 1, pushing up prices of imported items such as electronic goods and machinery apart from oil. May was the seventh straight month in which inflation was higher than the RBI's medium term target of four per cent. The RBI has revised up its inflation forecast to 4.7 per cent for the second half of the current fiscal year ending in March 2019, from the 4.4 per cent seen earlier.