India’s retail inflation accelerated to a new high under the revised consumer price index series in May, as rising food and fuel costs added to price pressures and reinforced concerns over the inflation outlook amid geopolitical tensions in West Asia and a weak start to the monsoon season.

Data released by the government on Friday showed retail inflation rose to 3.93 per cent in May, up from 3.48 per cent in April, remaining close to the Reserve Bank of India’s 4 per cent target. The reading was also the highest since the revised inflation series with a new base year and consumption basket was introduced in January. The increase comes after state-owned fuel retailers raised petrol and diesel prices during the month, pushing transport inflation to 1.75 per cent from a contraction of 0.01 per cent in April.

“The impact of increased petrol and diesel prices was clearly visible, with transport inflation rising by 176 basis points (bps) in May, while a slight LPG shortage pushed restaurants and accommodation services inflation up by 154 bps to 5.7 per cent from 4.2 per cent in April.

Inflation in the personal care division also increased by 80 bps, driven by a moderate rise in gold and silver prices. Core CPI (excluding food and fuel) also increased to 3.84 per cent in May,” said Soumya Kanti Ghosh, group chief economic adviser at State Bank of India, in a report.

Food inflation accelerated to 4.78 per cent in May from 4.20 per cent in April, raising concerns that price pressures could intensify further if weather conditions disrupt crop sowing during the crucial June-September monsoon season.

“During the first 11 days of June, India received 27 per cent below-normal rainfall, with rainfall deficits of 48 per cent in the central region and 38 per cent in the east and northern region. Continued weakness in monsoon progress could delay planting of summer-sown crops like rice, cotton, soybeans and pulses.

“Thus, while the overall inflation remains contained within the RBI range, going forward, the inflation outlook will depend significantly on geopolitical developments, global energy prices, exchange rate movements, spatial distribution of monsoon and the evolution of supply-chain conditions and hence we do not expect a rate cut in August as of now,” Ghosh said.

Earlier this month, the RBI raised its inflation forecast for the current financial year to 5.1 per cent from 4.6 per cent while keeping policy rates unchanged, citing concerns over second-round effects from supply-driven inflationary pressures.

“While softening crude oil prices and the cap on the weakening rupee remain a tailwind, we continue to monitor the impact of adverse monsoons on food inflation,” said Upasna Bhardwaj, chief economist at Kotak Bank. She expects cumulative rate hikes of 50 bps beginning in October.