India’s retail inflation for June surges to 4.81%, economists expect it to rise further; Check details
- Citing the reason for the rise in inflation, experts say erratic and incessant rainfall in northern India may have pushed vegetable prices higher and it is most likely to rise further in coming months.
India's retail inflation for June 2023 rose to 4.81 percent for, the first time in five months, which may erase a chance of a rate cut by the Reserve Bank this year.
Looking at the data, the retail inflation was higher than both the revised 4.31 percent for the previous month and the 4.58 percent expected in a Reuters poll of 55 economists.
Apart from the retail inflation, the food inflation also surged to 4.49 percent against a revised 2.96 percent in May.
ALSO READ: CPI inflation rises higher-than-estimates to 4.81% in June 2023; food inflation jumps to 4.49%
Citing the reason for the rise in inflation, experts say erratic and incessant rainfall in northern India may have pushed vegetable prices higher and it is most likely to rise further in coming months.
ICRA's economist Aditi Nayar said, as quoted by Reuters, "A less supportive base and the onset of the spike in vegetable prices pushed up the CPI inflation to a higher than anticipated 4.8%."
Prices of vegetables will remain high in July and may push retail inflation to an "uncomfortable 5.3%-5.5%" this month, Nayar added.
Earlier, reports arrive that fast food chain McDonald's dropped tomatoes from its burgers and wraps in many areas of India citing its rising prices.
On the other side, Emkay Global Financial Services' lead economist Madhavi Arora opined that the sharp sequential uptick in food-led Inflation could spill over till August.
She said to Mint, “The sharp sequential uptick in food-led Inflation could spill over till August, implying pressure on headline print will stay. There isn't much RBI can do in the food supply management but this adds pressure on them to stay vigilant on domestic dynamics. Global externalities have already pressed them to signal wait-and-watch guidance and the transient food spike will only complicate their reaction function.”
Similar views were expressed by Knight Frank India's Director of Research Vivek Rathi. He said, "Consumer inflation in June 2023 increased primarily due to food components of cereals, milk items, and spices, while inflationary pressures from fuel have largely moderated. In the coming months, an increase in certain food products, particularly vegetables, and fruits, is expected to contribute to inflationary pressures. However, the stability of the rupee and firm import inflation, along with wholesale prices should help balance consumer price growth. The overall low inflation level supports the argument for maintaining key policy rates in the upcoming RBI policy meeting."
Meanwhile, the core inflation remained below 6 percent for a fourth consecutive month. Economists estimate core inflation was between 5.1 percent and 5.4 percent in June, compared with 5.02 percent in May.
In June, the RBI kept its rates on hold for the second straight meeting, saying it would focus on anchoring inflation close to 4 percent, the mid-point of its 2%-6% target range.
Expressing concern over the CPI data, Ladderup Wealth Management's MD Raghvendra Nath said, "In June, India experienced a surge in retail inflation, with the CPI rising to 4.81%, breaking a four-month trend of decline following May's rate of 4.31%. The primary driver behind this inflationary spike can be attributed to an increase in food prices. Notably, the provisional figure of 4.88% exceeded the market expectation of 4.60% as per the Bloomberg Survey."
"Although the inflation rate remains below the upper threshold of the Reserve Bank of India's (RBI) target of 6%, the upward trend raises cautionary flags regarding the potential impact of the monsoon season and El-Nino, as well as its implications for the timing and anticipation of interest rate cuts by the central bank,” he added.
With agency inputs.
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Business NewsEconomyIndia’s retail inflation for June surges to 4.81%, economists expect it to rise further; Check details
First Published:12 Jul 2023, 08:30 PM IST
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