📷 Image Credits: Moneycontrol
India’s retail inflation reached a four-month high of 5.08 percent in June, marking a significant increase from the previous month’s 4.75 percent. The surge was primarily driven by a steep rise in food inflation, which soared to 9.4 percent due to the impact of a heatwave on vegetables. This spike in inflation comes after a 12-month low recorded in the previous month, with food inflation persisting at around 8.7 percent.
According to economic analysts at India Ratings and Research (Ind-Ra), the reversal in the declining trend of inflation in June was attributed to the base effect, as food inflation reached its highest level in six months at 9.36 percent. The latest data, released on July 12, confirms that June marked the eighth consecutive month of food inflation remaining above 8 percent in the country.
The consumer price index, a key measurement of inflation, saw a 1.33 percent increase compared to the previous month, with food inflation showing a 3.17 percent rise. Notably, vegetable and pulses inflation continued to remain in double digits, with increases of 29.3 percent and 16.1 percent, respectively. Potato inflation was recorded at 57.6 percent, onion at 58.5 percent, and tomato at 26.4 percent in June.
Inflation in miscellaneous items, however, remained below 4 percent for the sixth consecutive month, while core CPI held steady at 3.1 percent. Despite the rising inflation, the Reserve Bank of India (RBI) is unlikely to shift from its current policy stance of maintaining the policy rate. RBI Governor Shaktikanta Das emphasized that the uncertain economic environment globally and in India, paired with CPI headline inflation close to 5 percent, indicate that an interest rate cut is premature.
Looking ahead, economists anticipate that the improvement in the rainfall situation across the country, along with a favorable base due to high inflation in the previous year, should help contain inflation. While July-August inflation is expected to benefit from favorable base effects, the overall uptick in prices, especially in vegetables and telecom tariffs, may moderate the reduction in inflation rates.
Amidst these developments, experts suggest that inflation could ease to 2.5-3 percent, driven by the favorable base effect. With better sowing patterns and the distribution of rains, the pressure on prices is expected to reduce in the subsequent months, offering some relief to the economy.
