First of all, the reason for this error is that the retention label named 'Set Retention label' does not exist, you can list all the retention labels for checking, so to solve this problem you need to create a retention label named 'Set Retention label' first, see the link below for how to list and create retention labels.
List retention Labels:
Create retention Label:
For permanent deletion, if you want to use a retention label, you can set the item to be automatically deleted after a specified period of time, or the item can be permanently deleted based on the driveItem's ID.
About how to set up retention labels:
Permanently delete a driveItem by using its ID:
https://learn.microsoft.com/en-us/graph/api/driveitem-permanentdelete?view=graph-rest-1.0
Hope this helps.
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