India’s Retail Inflation Surges To 4.81 Per Cent In June: Govt

The headline inflation rate snapped its four-month falling streak and was pushed up by a rise in vegetable prices

The food inflation saw a sharp rise to 4.49 per cent from 2.96 per cent in May.

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Retail inflation in India rose to a three-month high of 4.81 per cent in June from 4.25 per cent in May, according to a data from the Ministry of Statistics and Programme Implementation on Wednesday. The previous high CPI was in March at 5.66 per cent.

The headline inflation rate snapped its four-month falling streak and was pushed up by a rise in vegetable prices and the fading away of the favourable base effect. 

The government has tasked the central bank to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side. The central bank mainly factors in the CPI to arrive at its bi-monthly monetary policy decision. The next policy review is scheduled early next month.

The food inflation saw a sharp rise to 4.49 per cent from 2.96 per cent in May. The inflation is, however, lower than 7.01 per cent in June 2022. The inflation was mainly driven higher by food and beverages where the consumer price index (CPI) rose to 183 in June from 179.1 in May. In the pan, tobacco, and intoxicants category, the index remained stable at 201.4 as compared to 201. 

In the clothing and footwear category, the index rose marginally from 186.2 to 186.9 in June. The housing sector saw a dip in the index to 174.4 in June from 175.6 in May. The fuel and light category saw a marginal rise from 182.8 to 182.9 in June. 

A Reuters poll of economists hinted that inflation in India would snapped a four-month decline in June as food prices spiked making a cut in interest rates unlikely any time soon.

Uneven monsoon rains have damaged crops of some perishable foods and hindered the movement of goods, resulting in shortages of basic ingredients for Indian cooking, such as tomatoes, chillies, and onions. The pressure on food prices is likely to persist over the coming months, making it less likely that inflation would return to the central bank's 4 per cent target in the near term.

Prices of food items, which account for around half of the CPI basket, especially kitchen staples, have almost tripled in the past month, hitting low income households hardest.

The price data are collected from selected 1,114 urban markets and 1,181 villages covering all states/UTs through personal visits by field staff of Field Operations Division of NSO, MoSPI on a weekly roster. During the month of June 2023, NSO collected prices from 98.9 per cent villages and 98.4 per cent urban markets, while the market-wise prices reported therein were 88.2 per cent for rural and 92.4 per cent for urban.

While CPI inflation extended its stay within the RBI's tolerance band of 2-6 per cent to four months, it has now been above the central bank's medium-term target of 4 per cent for 45 months in a row.

Meanwhile, the data also showed that the Index of Industrial Production (IIP) growth rate for the month of May came at 5.2 per cent as compared to 19.7 per cent last year. In April and May, the IIP was 4.8 per cent.