Retail inflation eases to 7.01pc in June but stays above RBI’s upper tolerance band

New Delhi, July 12 (FN Agency) India’s retail inflation eased marginally to 7.01% in June 2022 from 7.04% in the previous month but continued to stay above Reserve Bank of India (RBI)’s upper tolerance band. While deciding its monetary policy, the RBI factors in retail inflation. It is tasked to maintain price stability and keep retail inflation in the range of 2-6%.As per data released by the National Statistical Office (NSO) on Tuesday, rural inflation during June stayed at 7.09%, higher than urban inflation of 6.92% in the same month. Commenting on the latest inflation number, Sunil Kumar Sinha, Principal Economist, India Ratings and Research said that the worrying trend in June 2022 inflation as compared to May 2022 is 15 commodity groups out of 23 commodity groups with combined weight of 70.82% in CPI basket witnessing higher inflation. “This number was five with combined weight of 30.79% in May 2022,” he said.

Sinha noted that as the commodity prices have come off from their recent peaks lately, it will have some cooling impact on inflation but the weakness in rupee may wipe out some these gains. The NSO data showed a marginal decline in food inflation to 7.75% in June 2022 from 7.97% in May 2022 primarily due to sharp decline in oil and fat inflation. Aditi Nayar, Chief Economist, ICRA said that the moderation in the CPI inflation in June 2022 for food and beverages, and miscellaneous items, was almost fully offset by higher inflation for pan, tobacco and intoxicants, clothing and footwear, housing, and fuel and light.”In July 2022, we expect food inflation to cool benefitting from the recent downtrend in edible oils prices, whereas the surge in rainfall may cause a temporary uptick in the prices of perishables. The kharif area sown has recorded a YoY decline of 9.3% till July 8, 2022 owing to an irregular spatial and temporal distribution of monsoon rains, which may limit the gains from the downtrend in global food prices, unless sowing picks up pace in the remaining part of July 2022,” she said.