After a four-month decline, the country’s headline inflation rose to 4.81% in June 2023, from 4.31% in May 2023, according to official data from the Ministry of Statistics and Program Implementation. The rise in retail inflation is being attributed to the “uneven monsoon” which has damaged some crops and hampered the movement of goods, leading to a rise in food prices.
Data show that rural retail inflation rose to 4.72% in June 2023, up from 4.23% in May 2023, while urban inflation rose to 4.96% in that month, up from 4.33% in May 2023. Headline inflation was 7.01% in the same period last year, of which 7.09% was in rural areas and 6.86% in urban areas.
At current levels, CPI inflation has remained well within the RBI’s 2-6% tolerance range for the past four months. However, retail inflation has been above its medium-term target of 4% for 45 months.
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Meanwhile, retail inflation stood at 4.7%, 5.66% and 6.44% in April, March and February 2023, respectively.
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) last month cut its inflation forecast for 2023-24 to 5.1% from a previously forecast 5.2%.
Assuming a ‘normal monsoon’, CPI inflation was forecast at 4.6% in Q1, 5.2% in Q2, 5.4% in Q3 and 5.2% in Q4. The RBI panel decided to keep its focus on “unaccommodating” to ensure inflation gradually adjusts to target while supporting growth. After the June inflation figures were released, the average retail inflation for the first quarter of 2023-2024 is 4.6, similar to the RBI estimates.
Also Read: WPI Inflation Cools to -3.48% in May; lowest level since November 2015
According to the RBI’s MPC statement, the development of headline inflation is likely to be shaped by the dynamics of food prices. “Wheat prices could see a slight correction due to robust Mandi receipts and sourcing. On the other hand, milk prices are likely to remain under pressure due to supply bottlenecks and high feed costs,” the MPC said.
The RBI governor had also spoken about the central bank’s inflation target, saying it would try to bring inflation down to the 4% level. According to Das, consistent rate hikes along with the government’s supply-side efforts helped keep inflation at a level of 4.31% in May 2023, compared to 7.8% in April 2022.
Meanwhile, the country’s industrial production index (IIP) rose to 5.2% on an annualized basis in May 2023, from 4.5% in April, data provided by the Ministry of Statistics and Program Implementation (MoSPI) showed. Factory production, measured in IIP, rose 19.7% in May 2022, while the index rose 4.8% in the fiscal year ended May.
Also Read: Pakistan’s Inflation Drops to 29.4% in June; GDP grew by just 0.29% in 2022-23
