Food prices push retail inflation to 4 month high of 5.08 percent in June

Retail inflation surged to a four-month high of 5.08% in June, up from 4.75% in May, driven by a sharp rise in food prices, according to government data. The inflation rates for rural and urban areas were 5.66% and 4.39%, respectively. In May, inflation had dropped to a 12-month low of 4.75%, despite food inflation being around 8.7%. The current inflation level remains within the Reserve Bank of India’s (RBI) tolerance range of 4% with a 2% margin on either side.

Food inflation soared to 9.36% in June, marking the eighth consecutive month it has stayed above 8%. Vegetables and pulses were the main contributors, with prices increasing by 29.3% and 16.07%, respectively.

Within the food category, inflation for vegetables and pulses remained in double digits, with prices rising by 29.3% and 16.1% compared to 27.4% and 17.1% in the previous month. Specifically, potato prices rose by 57.6%, onion prices by 58.5%, and tomato prices by 26.4%.

Pulses inflation has been in double digits for 13 consecutive months, while vegetable inflation has seen a double-digit increase for eight consecutive months. Sequentially, vegetable prices increased by 14.2% from May, while pulses prices rose by 2.5%.

Inflation for sub-groups such as 'Eggs', 'Spices', 'Meat & Fish', and 'Pulses & Products' decreased compared to May 2024.

Despite the rise in food prices, core inflation — which excludes food and fuel components — slightly increased to 3.35% in June from 3.28% in May. Economists predict that food inflation risks will remain high. The RBI is unlikely to ease monetary policy soon, given robust economic growth and the near-term inflation threat, according to Bhardwaj.

In a recent interview -TV18, RBI Governor Shaktikanta Das suggested that interest rates might remain high for an extended period. "The overall economic environment globally and in India is so uncertain to talk in terms of an interest rate cut. CPI headline inflation continues to be close to 5% and according to surveys, it is expected to close to 5%. I think it is too early to talk about an interest rate cut," Das noted.