Costly vegetables push retail inflation to 4-month high

Retail inflation increased to four-month high of 5.08 per cent in June as food items, including vegetables became dearer, according to government data released on Friday.

The Consumer Price Index (CPI) based retail inflation was on a decline since January, before rising again in June.

The CPI-based retail inflation was 4.8 per cent in May 2024 and 4.87 per cent in June 2023.

The previous high was in February at 5.09 per cent.

Inflation in the food basket was 9.36 per cent in June, up from 8.69 per cent in May, according to the data of the National Statistical Office (NSO).

The government has tasked the Reserve Bank to ensure that the CPI inflation remains at 4 per cent with a margin of 2 per cent on either side.

The highest inflation was in vegetables at 29.32 per cent, followed by 'pulses and products' at 16.07 per cent in June on an annual basis.

'Cereals and products' and fruits too were dearer in June over the same month last year.

The retail inflation in rural areas was 5.66 per cent, higher than 4.39 per cent in urban India, showed the NSO data.

Commenting on the data, Aditi Nayar, Chief Economist at ICRA said the uptick in the headline CPI inflation to a four-month high in June 2024 was largely led by a rebound in the food and beverages inflation to above 8 per cent, amid a sharp sequential increase in vegetable prices.

Barring food and beverages, she said inflation across all the other sub-groups remained below the 4 per cent mark in June 2024.

"We are not ruling out a stance change in October 2024 and a 25 bps rate cut each in December 2024 and February 2025, followed by an extended pause, if the food inflation outlook turns decidedly favourable on the back of a normal magnitude and favourable distribution of rainfall in the rest of the monsoon season, and there are no other shocks, either global or domestic," she said.

According to the NSO data, the highest inflation was in Odisha (7.22 per cent) and lowest in Delhi (2.18 per cent).

NSO collects the price data from selected 1,114 urban markets and 1,181 villages covering all states and UTs on a weekly roster.

During June 2024, NSO collected prices from 99.7 pent villages and 98.6 per cent urban markets.