Retail inflation spikes to 4.81% in June, remains below RBI's threshold

Retail inflation as measured by Consumer Price Index (CPI) spiked to three-month high 4.81 per cent in June but remained below Reserve Bank of India's upper end of tolerance band of 6 per cent for third month in a row, government data showed. The spike in inflation came on the back of sharp rise in prices of vegetables.

Inflation figure for the month of May was revised upwards to 4.31 per cent from 4.25 per cent.

Food inflation came in at 4.49 per cent in June compared with 2.96 per cent in in May. Food prices witnessed a sharp increase on the back of rising prices of vegetables. Vegetable prices registered a growth of 12.17 per cent.

The food basket accounts for nearly half of the CPI.

The government has tasked the Reserve Bank of India to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side. The central bank mainly factors in the CPI to arrive at its bi-monthly monetary policy decision. The next policy review is scheduled early next month.

Last month, the Reserve Bank kept policy rates unchanged at 6.5 per cent and projected retail inflation for the current fiscal to average at 5.1 per cent, with June quarter inflation pegged at 4.6 per cent.

Separate macro-economic data showed that India's industrial production rose 5.2 per cent in May, according to the official data released on Wednesday.

Factory output measured in terms of the Index of Industrial Production (IIP) grew 19.7 per cent in May 2022.

The data released by the National Statistical Office (NSO) showed that the manufacturing sector's output increased by 5.7 per cent in May 2023.