Retail inflation again on its way up

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Retail inflation for June rose to a three-month high of 4.81 per cent, on raging food prices. But this is within the RBI’s tolerance limit of 6%. The Consumer Price Index-based inflation rose after declining for four months since February. The RBI, which will announce its next set of bi-monthly monetary policy in August, mainly takes into account the retail inflation while deciding the benchmark interest rate. The new inflation figures and the raging prices of vegetables will make it difficult for RBI to go in for a rate cut.

Retail or CPI inflation stood at 4.31 per per cent (revised upward from 4.25 per cent) in May and 7 per cent in June 2022. The previous high CPI was in March at 5.66 per cent.

According to the data released by the National Statistical Office (NSO), the inflation in the food basket was at 4.49 per cent in June, higher than 2.96 per cent in May. The food basket accounts for nearly half of the CPI.

The data revealed that annual rate of price rise was 19.19 per cent in case of spices, 12.71 per cent in ‘cereals and products’, 10.53 per cent in ‘pulses and products’, and 7 per cent in eggs. Fruits too were marginally costlier in June year-on-year.

However, there was a decline in inflation in ‘oil and fats’ (- 18.12 per cent) and vegetables (-0.93 per cent). 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.

Last month, the Reserve Bank kept policy rates unchanged at 6.5 per cent and projected retail inflation for the current fiscal to average at 5.1 per cent, with June quarter inflation pegged at 4.6 per cent.

The NSO data further showed that inflation was at 4.72 per cent in rural areas and 4.96 per cent in urban India. However, the food inflation was marginally higher than the national average in the rural areas.

The price data are collected from selected 1,114 urban markets and 1,181 villages covering all states and UTs through personal visits by field staff of field operations division of NSO, in the Ministry of Statistics and Programme Implementation (MoSPI) on a weekly roster.