Led by a spike in retail food prices, the consumer price inflation (CPI) for June hit a four-month high of 5.4 per cent, surging from the 5.01 per cent the previous month.
Consumer food price inflation — which has a weightage of about 47 per cent in the overall CPI index — grew 5.48 per cent in June against 4.80 per cent in the previous month.
The main reason for the spurt in food inflation is pulses, whose prices rose 22 per cent year-on-year in June. Both milk and vegetable prices also rose steeply.
Core CPI inflation for June came in at 4.85 per cent (4.7 per cent in May). The latest overall retail inflation of 5.4 per cent is, however, much lower than the 6.77 per cent recorded in June last year.
It was also well within the Reserve Bank of India’s newly adopted target range of two to six per cent.
The central bank expects consumer price inflation to remain soft through September before firming up to close to 6 per cent in the second half of this financial year .
Less room The higher-than-anticipated retail inflation in June may reduce the room for RBI Governor Raghuram Rajan to cut interest rates on August 4, when the monetary policy review meeting is scheduled.
Much of the monetary policy stance would depend on the extent of rainfall. India gets more than 70 per cent of its annual rainfall from June to September.
There was a sharp rise in consumer price inflation in rural areas during the month under review at 6.07 per cent (5.52 per cent). However, in urban areas, it went up only marginally to 4.55 per cent (4.41 per cent).