Retail Inflation Rises To 5.08% In June, Says Govt

Retail inflation rose to 5.08% in June, marking a 4-month high compared to May's 4.80%, according to government data released on Friday, July 12, 2024.

A statement from the Ministry of Statistics & Programme Implementation reported, "The year-on-year inflation rate based on All India Consumer Price Index (CPI) is 5.08% (Provisional) for June 2024. Rural and urban inflation rates stand at 5.66% and 4.39%, respectively."

This increase in inflation remains within the Reserve Bank of India's (RBI) tolerance range of 2-6%.

In May 2024, the Consumer Price Index (CPI)-based retail inflation stood at 4.8%, while it was 4.87% in June 2023.

Food prices were a significant contributor, with inflation in the food basket increasing to 9.36% in June from 8.69% in May, as reported by the National Statistical Office (NSO).

The surge in food prices continues to pose challenges for policymakers in India. The latest government data revealed month-on-month increases in retail inflation across various categories including cereals, meat and fish, eggs, dairy, oils and fats, fruits, vegetables, pulses, sugar, spices, and prepared snacks and sweets.

Data was collected from 1,114 urban markets and 1,181 villages across all states and union territories through personal visits by field staff.

Impact on RBI's Monetary Policy:

The Reserve Bank of India (RBI) is mandated to maintain CPI inflation at 4%, with a tolerance range of 2% on either side. For the fiscal year 2024-25, RBI has projected CPI inflation at 4.5%, with specific quarterly targets: Q1 at 4.9%, Q2 at 3.8%, Q3 at 4.6%, and Q4 at 4.5%.

Retail inflation plays a crucial role in the RBI's bi-monthly monetary policy decisions. Since May 2022, excluding recent pauses, the RBI has raised the repo rate by a cumulative 250 basis points to curb inflation. Increasing the repo rate is a monetary policy measure aimed at reducing demand in the economy, thereby helping to stabilize the inflation rate.

The repo rate represents the interest rate at which the RBI lends to commercial banks, influencing overall interest rates in the economy.