India's CPI Inflation At 4-Month High To 5.08% In June 2024, Owing To Sharp Spike In Food Prices

India's consumer price index (CPI) inflation shoots up to a 4-month high at 5.08% in June 2024, owing to a sharp surge in food prices. Nonetheless, this will be the tenth consecutive month where CPI inflation has stayed below RBI's upper tolerance limit. RBI has warned about food inflation and its uncertainty going ahead. With CPI increasing above the market's estimates, chances of an early rate cut look dim.

CPI inflation number stood at 5.08% (Provisional) for June 2024. The corresponding inflation rate for rural and urban is 5.66% and 4.39%, respectively in the month under review.

Inflation was at 4.80% in May 2024m and at 4.87% in June 2023. Also, the Ministry of Statistics & Programme Implementation said on Friday that inflation for sub-groups viz. 'Eggs', 'Spices', 'Meat & fish' and 'Pulses & products' have decreased as compared to May 2024.

Meanwhile, in June 2024, consumer food price index (CFPI) inflation jumped to 9.55% compared to 8.83% in May 2024 and more than doubled from 4.55% print in June last year.

The inflation rate in vegetables surged to 29.32%, while the pulses and products inflation rate came in at 16.07%. Overall, the inflation rate in food and beverages stood at 8.36% in June 2024. The inflation rate of pan, tobacco and intoxicants is at 3.08%, and that of clothing & footwear inflation rate is at 2.73%. Housing inflation came in at 2.69%, while fuel & light continued to be disinflationary with (-)3.66% in June 202.

As per Trading Economics data, the annual consumer inflation rate in India rose to 5.08% in June of 2024 from 4.75% in the previous month, well above market expectations of 4.80% to reflect the fastest pace of price growth since February. While marking the tenth consecutive month that Indian inflation remained within the RBI's relatively wide tolerance band of 2 percentage points from 4%, the halt in India's disinflation process strengthened expectations that the RBI will wait longer before starting its cutting cycle.

In the June 2024 policy, RBI said, "Looking ahead, overlapping shocks engendered by rising incidence of adverse climate events impart considerable uncertainty to the food inflation trajectory. Market arrivals of key rabi crops, particularly pulses and vegetables, need to be closely monitored given the recent sharp upturn in prices."

RBI further added that normal monsoon, however, could lead to a softening of food inflation pressures over the year. Pressure from input costs has started to edge up and early results from enterprises surveyed by the Reserve Bank expect selling prices to remain firm.

Also, the central bank pointed out that volatility in crude oil prices and financial markets along with firming up of non-energy commodity prices pose upside risks to inflation.

Hence, RBI has projected CPI inflation at 4.5% in FY25.

The price data are collected from selected 1114 urban Markets and 1181 villages covering all States/UTs through personal visits by field staff of Field Operations Division of NSO, MoSPI on a weekly roster.

During the month of June 2024, NSO collected prices from 99.7% villages and 98.6% urban markets while the market-wise prices reported therein were 88.9% for rural and 93.0% for urban.

The July 2024 inflation data will be presented on August 12, 2024.