Retail inflation rises to 6.09% in June on pricier food items

Our Bureau. New Delhi | Updated on July 13, 2020

With inflation number on the higher side, challenge for the RBI on a rate cut

For the first time in three months, headline retail inflation number for June surged to over 6 per cent, according to Government’s Statistics Office. The last headline number for the Consumer Price Index (CPI) was for March at 5.84 per cent.

Though the rate of food inflation at 7.87 per cent seems high, it is still lower than the 9.20 per cent in May, 8.76 per cent inMarch and the record high of 14.19 per cent of December 2019.

A higher inflation number poses dual challenge for the RBI’s Monetary Policy Committee (MPC). On the one hand, a Covid-19-affected economy needs another round of policy rate cut after the 115 basis points (100 basis points mean 1 percentage point) slashing during 2020. On the other, the current rate of retail inflation is above the RBI’s targeted range of 2-6 per cent with a median rate of 4 per cent. The MPC is scheduled to meet early next month (though it can be preponed, as it happened for the last two meetings) and expectation is that there could be another rate cut.

Meanwhile, according to the Statistics Office, as the various pandemic-related restrictions were gradually lifted and non-essential activities resumed, the NSO (National Statistics Office) collected prices from 1,030 urban markets and 998 villages for commodities that were available and transacted during June. The data collected, however, did not meet the adequacy criteria for generating robust CPI estimates at the State-level, it said.

Among the food and beverages group, pulses and products ruled high with an inflation rate of 16.68 per cent followed by meat and fish (16.22 per cent) and spices (11.47 per cent). Notably, fruits and vegetables did not showing any surge. In fact, the inflation rate for fruits dipped by a little over half a per cent while that for vegetable, it rose nearly 2 per cent.

Now, with vegetable prices recording a surge in many parts of the country, one can expect some upward movement in the headline number. However, with record foodgrain production during Agriculture Year of 2019-20 and better-than-expected kharif sowing in the wake of a normal monsoon, some cooling off can be expected in the overall number. Experts are keeping an eye on crude prices, which can see a change as economic activity gathers pace with a rise in demand.

Published on July 13, 2020

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