BackCPI inflation eases marginally in June, but remains above 7%
Consumer price inflation in June remained little changed at 7.01% from 7.04% in the previous month despite a raft of government measures, including export curbs on food items and excise duty cuts on fuels, to drive down prices.
PremiumNEW DELHI : Retail inflation held above the top end of the central bank’s tolerance limit for the sixth straight month in June, a development that may prompt it to raise interest rates further to cool prices.
Consumer price inflation in June remained little changed at 7.01% from 7.04% in the previous month despite a raft of government measures, including export curbs on food items and excise duty cuts on fuels, to drive down prices.
Inflation continued to remain elevated, driven by rising prices of vegetables and cereals, with price gains in rural areas outpacing those in urban pockets, data released by the ministry of statistics and programme implementation (MoSPI) showed on Tuesday.
Finance minister Nirmala Sitharaman said a “pointed attack on inflation" will need to continue. She added that the government would keep monitoring prices “item by item".
“I see the monsoon being favourable to agriculture. Production will be good and rural demand will remain intact. As the Reserve Bank of India (RBI) has estimated, till the start of the second half of the year, both RBI and government will have to be mindful," Sitharaman told reporters.
RBI’s monetary policy panel, which has raised interest rates by 90 basis points in the past two months, is set to meet again in the first week of August to decide on its next step. Economists expect RBI to continue raising rates to rein in inflation next month. One basis point is 0.01%.
Aditi Nayar, chief economist at rating company Icra Ltd, said she continues to foresee front-loaded rate hikes of 60 bps spread over the next two policy reviews followed by an extended pause, as the policy panel will focus on containing inflationary expectations without sacrificing growth.
Official data showed rural inflation in June stood at 7.09%, while inflation in urban areas came in at 6.92%. Economists expressed concern over rising vegetable prices, which jumped 17.4% in the month amid heat waves.
Sakshi Gupta, an economist at HDFC Bank, said vegetable prices (potato, onion and tomato inflation) have declined by 5.2% in July to date based on mandi (wholesale market) prices and could provide some relief to food inflation, adding that inflation could ease to 6.2-6.3% in the second half of FY23.
“The monsoon’s progress and Kharif sowing will be crucial for containing food inflation. However, elevated global crude oil prices and the weakening of the rupee pose a threat to near-term inflation outlook," said Rajani Sinha, chief economist at rating company CareEdge.
The worrying trend in June inflation is 15 of the 23 commodity groups, with a combined weight of 70.82% in the CPI basket, witnessing higher inflation, said Devendra Pant, chief economist, India Ratings and Research.
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