India's retail inflation, as measured by the Consumer Price Index (CPI), rose to 4.81 percent in June, according to the latest data released by the Ministry of Statistics on Wednesday, July 12.

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This marked an increase from the previous month's figure of 4.31 percent. The inflation rate for June, however, remained within the tolerance range set by the Reserve Bank of India (RBI).

However, the latest figures released by the government is slightly higher than the anticipated 4.6 percent projected by CNBC-TV18's poll of economists.

"The spike in vegetable prices is set to push the CPI inflation to an uncomfortable 5.3-5.5 percent in July 2023. We expect the vegetable price shock to result in the Q2 FY2024 CPI inflation exceeding the MPC's last forecast of 5.2 percent," stated Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA Ltd.

"Accordingly, we anticipate that the Committee will retain its hawkish tone in August 2023, keep the repo rate unchanged and signal that a pivot to rate cuts remains distant," she further added.

Furthermore, the Consumer Food Price Inflation (CFPI), a sub-index of the CPI, recorded an increase of 4.49 percent in June, compared to 2.91 percent in May.

Rural inflation rose to 4.72 percent, up from 4.17 percent in May, while urban inflation increased to 4.96 percent from 4.27 percent in the same period.

Among specific categories, there were notable changes in inflation rates. Vegetables inflation experienced a significant decline, with prices falling by 0.93 percent in June, compared to a substantial drop of 8.18 percent in May.

In contrast, fuel and light inflation decreased slightly to 3.92 percent in June from 4.64 percent in May. Housing inflation also showed a marginal decline, standing at 4.56 percent, down from 4.84 percent in the previous month.

On the other hand, clothing and footwear inflation increased slightly to 6.19 percent in June, compared to 6.64 percent in May. The inflation rate for pulses, a staple food item, witnessed a considerable rise of 10.53 percent in June, compared to 6.56 percent in the previous month.

According to Suvodeep Rakshit, Senior Economist at Kotak Institutional Equities, the June Consumer Price Index (CPI) inflation of 4.8 percent exceeded expectations slightly due to a surge in vegetable prices, accompanied by a modest increase in pulses prices.

"This trend in vegetable prices continued in July too. Core inflation was broadly unchanged at 5.1 percent but will likely moderate over the next few months. Overall, we see upside risks to CPI inflation over the next few months as monsoon-related risks on food prices play out," he said.

"The RBI will remain cautious and we continue to expect the RBI to remain on an extended pause as it watches for the domestic growth-inflation mix and global monetary policy decisions," he added.

First Published:Jul 12, 2023 5:46 PM IST