India’s retail inflation re-ignites in June as food prices surge
Rising food prices and higher inflation in rural areas are causes for concern, an economist says
RETAIL inflation rate in India rose in June for the first time in five months due to a sharp rise in food prices, Indian government data showed on Friday (Jul 12).
Annual retail inflation rose to 5.1 per cent in June, from about 4.8 per cent in May.
Prices of food – which account for nearly half of the retail inflation – rose 9.4 per cent from last year in June. This is compared to an 8.7 per cent rise in May.
Food prices in India have been accelerating at more than 8 per cent year on year since November 2023.
Extreme heat and heavy floods in India’s northern states disrupted agricultural production, with vegetable prices rising about 29.3 per cent in June, against the 27.3 per cent increase in the previous month.
“The heatwave impact has been seen on vegetables... These products will continue to witness high inflation,” said Madan Sabnavis, economist at the Bank of Baroda.
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Devendra Pant, an economist at India Ratings, added that higher rural inflation coupled with rising food prices is a “cause of concern both for consumption and investment growth”.
In June, rural inflation was about 5.7 per cent, while inflation in urban areas stood at about 4.4 per cent.
The inflation rate for cereals in June was 8.8 per cent compared to 8.7 per cent in the previous month, while that of pulses fell to about 16 per cent from 17.1 per cent in May.
The Indian government does not release core inflation data – which strips out volatile food and energy prices. However, three economists estimated it to be between 3 and 3.1 per cent in June
High food prices have led to the Reserve Bank of India (RBI) keeping its key interest rate unchanged at 6.5 per cent for eight consecutive meetings.
RBI governor Shaktikanta Das said on Thursday that it will be too early to talk about a change in the monetary policy stance, until inflation is somewhere close to the central bank’s 4 per cent target.
“Any rate action can be considered only in October, and will be heavily data dependent,” the governor added. REUTERS
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