The latest Consumer Price Index data showing a revival in retail inflation proves exactly why RBI’s monetary officials have reiterated the need to keep the policy stance firm in order to ensure price stability. With food prices stabilizing and rising sharply, the CPI-based provisional for June Inflation rate increased by half a percent At a three-month high of 4.81%. Inflation in the food and beverages group, the largest component of the CPI that contributes around 46% of its weight, led the revival, rising 128 basis points to 4.63% from May’s level. Food price inflation was wide-ranging and 10 out of 12 sub-groups saw a year-on-year increase: Cereals recorded an increase of 12.7%, Eggs saw an increase of 7%, Dairy saw an inflation of 8.56%, Pulses saw a growth of 10.5% and spices. over 19%. Vegetables, which have a 6% weight in the CPI and are the third largest among the dozen items in the food basket, though still in deflation territory at minus 0.93%, saw prices rise sharply in June to reduce deflation by more than 700 basis points. , Month-on-month, price inflation in vegetables rose to 12.7%, the highest sequential rate of price rise in the essential food group since October 2021. Tomatoes were the main culprit, with prices skyrocketing 64% from May levels. Barring three vegetables in the 19-member basket, including okra and lemon, all others, including the most widely used potatoes and onions, registered sharp sequential inflation.
The year-on-year rise in price rise despite a high base – June 2022 saw inflation at 7.01% – is also a clear indication that price pressures are gaining a worrying momentum. Core inflation, which excludes food and fuel and light groups, is still stuck at 5.16%, barely moving up from May’s pace of 5.17%. Of non-food items, prices of clothing and footwear, as well as health and personal care, saw an increase of more than 6% in June. The cost of education also continued to rise. Against the backdrop of erratic trend of monsoon rains, the outlook for kharif crop production will largely depend on meeting the shortfall in sowing in the rest of July. On July 7, while overall kharif sowing was 8.7% lower than a year earlier, essential staples of rice and pulses saw a reduction of 24% and 26%, respectively. And with oilseeds also seen down 14% from 2022 levels, there is a real risk that all recent hard-earned gains in reining in inflation expectations could begin to erode in the coming months Are. To prevent the macroeconomic recovery from faltering, policy makers will have to tighten their grip on prices.