India’s retail inflation rate has broken its recent trend of moderation, climbing above 5% in June 2024, primarily due to rising food prices. This uptick poses fresh challenges for policymakers who have been working to manage inflationary pressures.
According to official data released Friday, the Consumer Price Index (CPI)-based inflation rate for June stood at 5.08% year-on-year. The inflation rates for rural and urban areas were recorded at 5.66% and 4.39% respectively.
The surge in food prices remains a significant concern. Government data revealed month-on-month increases across various food categories, including cereals, meat, fish, eggs, milk products, oils, fats, fruits, vegetables, pulses, sugar, spices, and prepared snacks.
This rise comes after a period of easing inflation, with May recording a 12-month low of 4.75%. While the current rate remains within the Reserve Bank of India’s (RBI) comfort zone of 2-6%, it exceeds the ideal target of 4%.
The data, collected from 1,114 urban markets and 1,181 villages across all states and union territories, provides a comprehensive picture of price trends across India.
Despite this uptick, India has managed its inflation trajectory relatively well compared to many advanced economies. The RBI has maintained the repo rate – the rate at which it lends to banks – unchanged for eight consecutive policy meetings, following a cumulative increase of 250 basis points since May 2022 to combat inflation.
However, persistent food price pressures are complicating efforts to bring inflation down to the 4% target. This development may influence future monetary policy decisions as the RBI balances growth aspirations with price stability.
The next CPI data release for July 2024 is scheduled for August 12, which will be closely watched for signs of whether this inflationary trend continues or reverts to the previous pattern of moderation.
(With ANI inputs)