Retail inflation hits 8-month high, up 5.4% on rise in pulse prices

The government will release on Tuesday the data on wholesale price inflation, which had stayed in the negative zone for seven consecutive months.

By: ENS Economic Bureau | Agra/new Delhi, New Delhi | Published: July 14, 2015 1:29:53 am
inflation, india inflation, inflation in india, india's infalation, india inflation rate, business news, inflation calculation, inflation rate india, inflation news, economy news, indian economy inflation, infaltion indian economy Inflation in the fuel and light segment, however, eased a tad to 5.9 per cent in June, compared with 6 per cent in May when oil-marketing companies had effected two rounds of hikes in diesel and petrol prices.

Retail inflation rose for a second straight month to 5.4 per cent in June, compared with 5.01 per cent in the previous month, mainly as food inflation unexpectedly shot up by almost 0.7 percentage points from the May level on the back of a spurt in pulses prices, data released on Monday showed.

Analysts said the higher-than-expected rise in the consumer price index (CPI) and a recent slowdown in monsoon showers from its peak in June have reduced the leeway for the Reserve Bank of India (RBI) to cut the benchmark lending rate in its next monetary review policy meeting in August to spur demand, despite a slowdown in the industrial production growth to 2.7 per cent in May from 3.4 per cent in the previous month.

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The data also surprised some analysts due to the lower-than-expected rise in the core CPI at 4.8 per cent in June from 4.6 per cent a month before. “The surprising factor for the rise in the CPI was that it was food-driven, while we were expecting it to be driven by core inflation, given the increase in the service tax in June (from 12.36 per cent to 14 per cent). We expect the RBI to hold on to the interest rates for now,” said Sonal Verma, India economist at Nomura in Mumbai.

Although some rise in food inflation was anticipated following the forecast by the Met department of a deficient monsoon season in 2015, the spurt to 5.48 per cent in June, against 4.8 per cent in May, was beyond expectations. This is because despite the gloomy forecast by the India Meteorological Department (IMD), the country received a 16 per cent above-normal rainfall in June.

Pulses inflation skyrocketed to 22.2 per cent in June, compared with 16.6 per cent in the previous month and 12.4 per cent in April, thanks primarily to a 10 per cent drop in production of the commodity in the crop year through June.

Inflation in the fuel and light segment, however, eased a tad to 5.9 per cent in June, compared with 6 per cent in May when oil-marketing companies had effected two rounds of hikes in diesel and petrol prices.

The government will release on Tuesday the data on wholesale price inflation, which had stayed in the negative zone for seven consecutive months.

While trimming the benchmark lending rate by 25 basis points this month, RBI governor Raghuram Rajan had termed monsoon as the “biggest uncertainty” facing the economy and raised the central bank’s retail inflation target by 20 basis points to 6 per cent by January 2016.

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