India's Retail Inflation Surges To 4.81% In June On Higher Food Prices

India's retail inflation, measured by the Consumer Price Index or CPI surged to 4.81% in June amid higher food prices, according to data released on Wednesday by the statistics ministry. India's CPI inflation was 4.31% in May.

Nish Bhatt, Founder & CEO, Millwood Kane International said, "Retail inflation after hitting a two-year low has risen again. June CPI inflation at 4.8% though within the RBI's desired range of 2-6% but the rise may create some cause for concern. The rise in retail inflation is largely to the unseasonal monsoon showers, spike in prices of vegetables - mainly Tomatoes. The rise in prices of meat, fish pulses along with vegetables has led to a rise in food inflation. The July inflation too will reflect high prices as the current situation may take some time to even out. The rise in inflation may have an impact on the rate trajectory, and the central may stay on a long pause."

Earlier, a Bloomberg survey of economists anticipated India's retail inflation likely accelerate to 4.6% in June after moderating for 4 months.

India's inflation likely snapped a four-month fall in June as food prices jumped, as per a Reuters poll of economists, making a cut in interest rates unlikely any time soon, while the Reserve Bank of India is also expected to resist pressure to raise rates.

It is worth mentioning that the soaring prices of tomato and onion pose massive risk for India's retail inflation. Tomatoes prices witnessed sharp rise all across India amid tight supplies caused by rainfall in several parts across the country. Last month hotter-than-normal temperature in the country also impacted the production of the crop. These factors led to a fivefold jump in the prices of tomatoes all over the country. Prices of tomato tend to surge in the month of June and July but the price rise this year is quite massive.

According to a Reuters report, "We believe the RBI will tolerate a supply-side driven rise in food inflation as long as core price pressures continue to ebb within the bank's tolerance band," said Alexandra Hermann, senior economist at Oxford Economics.

The July 3-10 Reuters poll of 55 economists projected consumer price index (CPI) (INCPIY=ECI) inflation surged at an annual pace of 4.58% in June, slightly faster than the 4.25% registered in May. The forecasts ranged from 4.10% to 4.80%, with more than 90% expected inflation to be higher than May.