As per the data released by the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation, the retail price inflation at the end of June was 7.01 per cent (rural 7.09 per cent, urban 6.92 per cent), as compared to 7.04 per cent in May (rural 7.08 per cent, urban 7.08 per cent).
“The CPI (consumer price index) inflation print cooled only marginally in June, but nonetheless offered welcome relief, coming in well below our forecast of 7.2 per cent,” said Aditi Nayar, Chief Economist, ICRA.
The moderation in the CPI inflation in June for food and beverages and miscellaneous items was almost fully offset by higher inflation for pan, tobacco and intoxicants, clothing and footwear, housing, and fuel and light, Nayar added.
The dip in the food inflation in June was led by eggs, vegetables, edible oils, pulses and sugar.
“In July, we expect food inflation to cool, benefiting from the recent downtrend in edible oil prices, whereas the surge in rainfall may cause a temporary uptick in the prices of perishables,” Nayar said.
According to Nayar, the kharif area sown has recorded a YoY decline of 9.3 per cent till July 8, which may limit the gains from the downtrend in global food prices, unless sowing picks up pace in the remaining part of July.
With commodity prices having eased sharply on the back of a feared global recession, and the decline in vegetable and edible oil prices, the Indian retail inflation prints should soften below 7 per cent in the coming months, Nayar said.
According to Nayar, there might be front loaded rate hikes of 60 bps spread over the next two policy reviews followed by an extended pause, as the Reserve Bank of India’s Monetary Policy Committee (MPC) will focus on containing inflationary expectations without sacrificing growth.
According to the government, the price data are collected from select 1,114 urban markets and 1,181 villages covering all states/UTs through personal visits by field staff of the Field Operations Division of NSO.
In June, the NSO collected prices from 99.7 per cent villages and 98.2 per cent urban markets while the market-wise prices reported therein were 89.8 per cent for rural and 93.7 per cent for urban.