India Business Journal - Costly vegetables, fruits and cereals push CPI inflation up to 5.08% in June

ECONOMY

Costly vegetables, fruits and cereals push CPI inflation up to 5.08% in June

IBJ Bureau
Jul 13, 2024

Retail inflation rose to four-month high of 5.08 per cent in June. The Consumer Price Index (CPI)-based inflation was pushed up by a further spurt in already-elevated prices of vegetables and fruits amid heatwaves that struck many parts of the country during the month, and firmness of cereal prices, official data showed on Friday.

The headline print was on the higher side of expectations and bucked a declining trend seen since December 2023.

In May, the inflation at the retail level was 4.8 per cent, and in June 2023, it had come in at 4.87 per cent.

However, the inflation rate is likely to see a sharp moderation in July to around 3 per cent for the sole reason of a very high base (7.44 per cent) even if price pressures remain broadly unchanged. That however could be a transient reprieve.

The latest data is in conformity with the Reserve Bank of India’s (RBI) observation in its bimonthly monetary policy statement in June that the path of disinflation, driven by softening in its core component, has been interrupted by “volatile and elevated food inflation due to adverse weather events”.

On Thursday, RBI Governor Shaktikanta Das had said that though headline inflation was moderating, it still remained above the target of 4 per cent and had asserted that it was “too pre-mature to even think about Repo Rate cuts at this juncture”. The RBI has projected the CPI inflation for 2024-25 at 4.5 per cent, with Q1 at 4.9 per cent, Q2 at 3.8 per cent, Q3 at 4.6 per cent and Q4 at 4.5 per cent.

Core inflation, most amenable to demand-management measures by the RBI, saw a moderate rise to 3.16 per cent in June from 3.12 per cent in May. This was the first rise in the core inflation rate in 19 months. “This was the seventh consecutive print of a sub-4 per cent core inflation print, benefitting partly from the protracted impact of last year’s softening in commodity prices, Icra Chief Economist Aditi Nayar said.