Retail inflation rises to 4-month high of 5.08% in June

India’s retail inflation reversed its declining trend and rose to a four-month high of 5.08% in June, according to data released today by the Ministry of Statistics & Programme Implementation.

This comes after Consumer Price Index (CPI) inflation eased to 4.75% in May from 4.83% in April. Retail inflation remained below 5% for three consecutive months since March 2024.

The inflation rate for rural areas increased to 5.66% in June from 5.34% in May while urban inflation rose from 4.21% in May to 4.39% in June.

Consumer Food Price Index inflation jumped to 9.4%. The inflation rate of vegetables jumped to 29.32% in June.

RBI governor Shaktikanta Das last month said inflation is expected to fall below 4% in the second quarter of 2024-25 but that may not lead to a rate cut because inflation is again expected to rise in the succeeding quarter to 4.7%. The last mile of our journey towards 4% inflation target is pretty sticky, the RBI governor said during the post monetary policy press conference. “When we have confidence that inflation will stick to 4% and not go up, then we will act on further monetary policy action,” Das said.

RBI’s monetary policy committee (MPC) expects inflation to be at 4.5% in 2024-25 with Q1 at 4.9%; Q2 at 3.8%; Q3 at 4.6%; and Q4 at 4.5% if the monsoon is normal.

While inflation is easing, the final leg of this disinflation journey may be tough, Das said, adding that sustained price stability would set strong foundations for a period of high growth.

“According to our projections, the second quarter of 2024-25 is likely to see some correction in headline inflation, but this is likely to be one-off on account of favourable base effects and may reverse in the third quarter,” said Das.

“At the current juncture, the uncertainties related to the food price outlook warrant close monitoring, especially their spillover risks to headline inflation,” he added.

“We are on the right track, but there is still work to be done. Globally, there are concerns that the last mile of disinflation might be protracted and arduous amidst continuing geopolitical conflicts, supply disruptions and commodity price volatility,” the RBI governor said.

"In India, with growth holding firm, monetary policy has greater elbow room to pursue price stability to ensure that inflation aligns to the target on a durable basis. In its current setting, monetary policy remains squarely focused on price stability to effectively anchor inflation expectations and provide the required foundation for sustained growth over a period of time," he said.