The retail inflation in India observed a notable rise, hitting a three-month high of 4.81% in June, up from 4.25% in the preceding month of May, as stated by the Ministry of Statistics and Programme Implementation. This rise follows four months of declining figures and surpasses March’s previous high CPI of 5.66%.
Key Factors Influencing the Inflation Rise
The inflation rate’s ascent is attributed to an increase in vegetable costs and the disappearance of the previous beneficial base effect. The central bank, assigned by the government, strives to maintain the retail inflation at approximately 4%, with a 2% margin allowed on either side. These CPI figures significantly influence the central bank’s bi-monthly monetary policy decision, due for review next month.
Rising Food Inflation and CPI
A noteworthy increase was seen in food inflation, which shot up to 4.49% from 2.96% in May, although it is lower than June 2022’s figure of 7.01%. This inflation hike was mainly propelled by food and beverages, with the CPI rising to 183 in June from 179.1 in May. Simultaneously, prices of basic cooking ingredients like tomatoes, chillies, and onions have nearly tripled over the past month due to monsoon-induced crop damage and transportation hurdles, exerting additional pressure on low-income households.
Inflation Persisting Above Central Bank’s Medium-Term Target
Despite the Consumer Price Index (CPI) inflation consistently positioning itself within the parameters set by the Reserve Bank of India – a tolerance spectrum of 2-6% over four consecutive months, it has continually superseded the central bank’s intermediary benchmark of 4% for an unbroken sequence of 45 months. Simultaneously, contemporaneous data discloses a decrement in the Index of Industrial Production (IIP) expansion rate for the month of May, noting a value of 5.2%, which marks a significant descent compared to the preceding year’s rate of 19.7%.
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