June CPI inflation may inch up to 4.9%: Mint poll

Inflation in India may have accelerated in June mainly on account of higher vegetable prices. (Pixabay)
Inflation in India may have accelerated in June mainly on account of higher vegetable prices. (Pixabay)

Summary

If the median projection by economists for June is correct, inflation would have accelerated for the first time in six months.

India's retail inflation may have inched up to 4.9% in June from 4.75% the previous month mainly on account of higher vegetable prices, according to the median estimate of 18 economists polled by Mint. While this would be the first acceleration in inflation in six months, a favourable base effect may have contained the pace.

Inflation projections by the economists polled by Mint ranged from 4.56% to 5.14%. The official data is set to be released on 12 July.

 

“The likely uptick in June CPI inflation closer to the 5% mark, will be on account of higher food and beverages prices, particularly led by vegetables," Deutsche Bank said in a note last week.

Food, which constitutes almost 40% of the inflation basket, has recorded 8%-plus inflation since November 2023, while vegetable prices have increased in double digits since then. 

The Reserve Bank of India expects inflation to average 4.5% in the current financial year. However, persistently elevated food inflation and the uncertainty surrounding their future trajectory have been a major headache for the central bank.

Also read: Monsoon effect: Tomato prices soar to 90/kg in Delhi-NCR as supplies hit due to rains

Besides vegetables, pulses and milk prices may have added to inflationary pressures in June. However, a more favourable base effect from July could help slow inflation.

Last month, the Monetary Policy Committee (MPC) of the RBI kept the policy repo rate unchanged at 6.5%, although two of the six members of the panel voted to cut the rate, as the uncertainty over food’s inflation trajectory is alive and inflation continues to be above the medium-term aim of 4% for over four-and-a-half years now.

Also read: Why vegetable prices are burning a hole in your wallet

“In the near term, base effects are likely to contribute to a precipitous drop in the headline inflation in July-September, as expected by the RBI," Barclays said in a report last week. However, it added the central bank would want to see signs of durable alignment of headline inflation with the target from October-December.

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