India’s retail inflation rate reached a four-month high of 5.08 per cent in June, with food inflation surging to over 9 per cent, marking the highest level in six months, as per data released by the National Statistical Office (NSO). This increase in inflation came amidst a rise in food prices, particularly vegetables, which saw a spike possibly due to extended heatwave conditions across the country. The surge in food prices, especially in vegetables, has raised concerns and is expected to impact consumption demand and limit the scope for any immediate rate cut by the Reserve Bank of India (RBI). As per the data, the headline inflation in June has now stayed above the 4 per cent mark for the 57th consecutive month, signaling potential challenges for policymakers and the economy.
The latest figures showed that the Consumer Food Price Index-based inflation rose to 9.36 per cent in June from 8.69 per cent in May, with urban areas experiencing a higher increase in food inflation compared to rural areas. Despite a moderation in the non-food segment, core inflation remained steady at 3.14 per cent in June. The data revealed that more than half of the major states/UTs in India registered inflation rates higher than the national average, with Odisha, Bihar, and Karnataka recording some of the highest rates.
The rise in retail inflation has been accompanied by a positive growth in the country’s factory output, as measured by the Index of Industrial Production (IIP), which reached a seven-month high of 5.9 per cent in May. Manufacturing, accounting for a significant portion of the IIP, showed growth in May, reflecting an improvement in industrial activity amid increased electricity output. However, the high food inflation continues to pose challenges for policymakers and the RBI, impacting the overall consumption recovery and economic outlook.
The Ministry of Statistics & Programme Implementation reported that rural and urban inflation rates stood at 5.66 per cent and 4.39 per cent, respectively in June, highlighting the differential impact across different regions. The RBI, which aims to maintain CPI inflation at 4 per cent with a margin of 2 per cent on either side, has projected a CPI inflation rate of 4.5 per cent for the fiscal year 2024-25. The central bank’s monetary policy decisions will be crucial in addressing the challenges posed by the current inflationary trends and their impact on the overall economic outlook in the coming months. The next Monetary Policy Committee meeting is scheduled for August, where key decisions will be made to navigate the inflationary landscape and support sustainable economic growth.
