The recent data on retail inflation in India reveals a mix of positive and concerning trends. In May, headline inflation reached a 25-month low of 4.25%, largely driven by the high price gains recorded in May 2022, where inflation had exceeded 7%. This deceleration aligns with the Reserve Bank of India’s decision to pause monetary tightening as it evaluates the impact of past interest rate increases. However, month-on-month, the provisional Consumer Price Index (CPI) showed a consistent inflation rate of 0.51% in May, unchanged from April’s six-month high reading. One of the notable contributors to the decline in year-on-year price gains was the deceleration in food item inflation, which dropped by 93 basis points to 2.91%. Oils and fats were particularly influential in driving down food prices, experiencing a 16% deflation. Additionally, the cereals and products category continued to deflate, with cereal inflation easing by over 100 basis points to 12.7%. However, caution must be exercised when interpreting the year-on-year moderation in inflation, especially within the food and beverages group, which accounts for 46% of the CPI. Nine out of its 12 sub-groups witnessed sequential increases in price levels. Vegetable prices, in particular, experienced 3.35% sequential inflation, nearly double the gains seen in April. Milk and dairy products also saw inflation rise to a three-month high of 0.67%, while pulses reached a 31-month high of 6.56% year-on-year. Policy-makers face the challenge of convincing consumers that inflation will be effectively managed to safeguard their purchasing power and savings. It is crucial to address the fluctuations in prices, particularly in essential food items, and create a favorable environment that instills confidence in the stability of prices. While the deceleration in overall retail inflation is a positive sign, sustained efforts are necessary to tame inflationary pressures, ensure long-term fiscal sustainability, and protect the welfare of Indian households.