After a four-month decline, the country's headline inflation rose to 4.81% in June 2023 from 4.31% in May 2023, the official data released by the Ministry of Statistics & Programme Implementation shows. The rise in retail inflation is being attributed to “uneven monsoon”, which has damaged some crops and hindered the movement of goods, causing food prices to surge.
Retail inflation in rural areas surged to 4.72% in June 2023, up from 4.23% in May 2023, while urban inflation surged to 4.96% in the said month, up from 4.33% in May 2023, the data shows. The headline inflation during the year-ago period stood at 7.01%, including 7.09% in rural and 6.86% in urban areas.
At the current level, the CPI inflation remains well within the RBI's tolerance band of 2-6% for four months now. However, retail inflation has been above its medium-term target of 4% for 45 months.
Meanwhile, the retail inflation in April, March, and February 2023 stood at 4.7%, 5.66%, and 6.44%, respectively.
The monetary policy committee (MPC) of the Reserve Bank of India (RBI) had last month reduced its inflation forecast for 2023-24 to 5.1% from 5.2% projected earlier.
Assuming a “normal monsoon”, CPI inflation in Q1 was projected at 4.6%, Q2 at 5.2%, Q3 at 5.4% and Q4 at 5.2%. The RBI panel had decided to remain focused on “withdrawal of accommodation” to ensure inflation progressively aligned with the target while supporting growth. With June inflation numbers out, the first quarter average retail inflation for 2023-24 stands at 4.6, similar to the RBI’s estimates.
According to the RBI’s MPC statement, the headline inflation trajectory is likely to be shaped by food price dynamics. “Wheat prices could see some correction on robust mandi arrivals and procurement. Milk prices, on the other hand, are likely to remain under pressure due to supply shortfalls and high fodder costs," the MPC had said.
The RBI Governor had also talked about the central bank's inflation target, saying it'll try to bring down inflation to the level of 4%. According to Das, consistent rate hikes, along with the government's push on the supply side, helped contain inflation at the level of 4.31% in May 2023 from 7.8% in April 2022.
Meanwhile, the country's index of industrial production (IIP) in May 2023 rose to 5.2% on an annual basis from 4.5% in April, the data provided by the Ministry of Statistics and Programme Implementation (MoSPI) shows. The factory output, measured in IIP, surged 19.7% in May 2022, while the index surged 4.8% in the financial year till May.