High food prices push retail inflation to 4.81 pc in June

New Delhi, July 13 :  Driven primarily by high food prices, India’s retail inflation jumped to 4.81% year-on-year in June 2023. As per the data released by the Ministry of Statistics & Programme Implementation (MoSPI) on Wednesday, food inflation surged to 4.49% in June this year as compared to 2.96% in the previous month.

Retail inflation measured by consumer price index (CPI) was 4.31% in May this year.
The retail inflation has increased but it continues to stay in the Reserve Bank of India’s tolerance band of 2-6%.

“June CPI inflation at 4.8% was slightly higher than expectations with vegetable prices spiking up in June along with some increase in pulses prices. This trend in vegetable prices continued in July too,” said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.

Rakshit said that he sees upside risks to CPI inflation over the next few months as monsoon-related risks on food prices play out.
With inflation inching up, the Reserve Bank of India (RBI) is expected to hold on to the current policy repo rate while reviewing the monetary policy.

Amid downward trend in retail inflation, the Monetary Policy Committee (MPC) of the RBI has held the repo rate at 6.50% for the last two consecutive MPC meetings.
The latest inflation data showed that while rural inflation stood at 4.72% in June, urban inflation was at 4.96%.

Over the past few weeks vegetable prices have been on the boil with tomato prices reaching as high as Rs 150 a kilo in many cities.

“The rise in retail inflation is largely due to the unseasonal monsoon showers, spike in prices of vegetables – mainly tomatoes. The rise in prices of meat, fish pulses along with vegetables has led to a rise in food inflation. The July inflation too will reflect high prices as the current situation may take some time to even out. The rise in inflation may have an impact on the rate trajectory, and the central may stay on a long pause,” said Nish Bhatt, Founder & CEO, of Millwood Kane International.