(Reuters) – India’s retail inflation rate rose for the first time in five months in June due to a continued sharp spike in food prices, government data showed on Friday.
Annual retail inflation was 5.08% in June, up from 4.75% in May. Economists polled by Reuters had forecast inflation at 4.80%.
Prices of food, which account for nearly half of the retail inflation, rose 9.36% from last year in June, compared to an 8.69% rise in May. Food prices have been accelerating at more than 8% year-on-year since November 2023.
COMMENTARY:
SWATI ARORA, ECONOMIST, HDFC BANK, MUMBAI
Food inflation continues to remain high. Going forward, a favourable monsoon is likely to support a moderation in food prices in Q2 FY25.
CPI inflation is expected to move below 4% in Q2, led by a base effect and coupled with a moderation in food prices. We expect CPI to average at 4.6% in FY25.
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
The Reserve Bank of India’s monetary policy committee’s (MPC) concern over the trajectory of food inflation played out in the June data. Inflation rose 5.1% year on year, close to our forecast of 5%, on higher food costs, reflected in the steeper month-on-month rise assumption vs 0.7% in May.
A weak start to the southwest monsoon in June and a prolonged heatwave impacted vegetable prices, in turn pushing food and beverages inflation back above 8%.
With the MPC’s concerns validated, we don’t expect the central bank to deviate from their preference to keep the repo rate on hold when they meet next month.
(Reporting by Siddhi Nayak in Mumbai and Kashish Tandon in Bangalore; Editing by Savio D’Souza)
