RBI Bulletin: Hike in retail inflation due to food prices has halted overall disinflation process
In its latest monthly bulletin, the Reserve Bank of India noted that inflation is still a concern for the economy. It said that inflation due to rising food prices has derailed the disinflation process.
“Consumer price inflation ticked up in June 2024 after three consecutive months of moderation as a broad flare-up in the vegetable prices halted the overall disinflation that had been underway,” the RBI said.
It further noted: “In India, the second quarter of 2024-25 has begun with signs of quickening momentum in the economy. The improvement in the outlook for agriculture and the revival of rural spending have turned out to be the bright spots in the evolution of demand conditions.”
According to the statistics ministry data, retail inflation measured by the consumer price index (CPI) increased to 5.08% year-on-year last month, following a decline to a 12-month low of 4.75% in May. The uptick in June can be attributed to the heightened food inflation, which holds a significant weightage of almost 40% in the consumer price basket.
In June, food inflation gauged by the consumer food price index (CFPI) escalated to 9.36% year-on-year, surpassing the 8.69% rise in May and the 8.70% in April.
Food prices have remained elevated for over a year—and have stayed above 8% since November—primarily due to last year’s uneven and below-normal monsoon rains.
The higher food inflation in June was because of the rise in prices of items such as cereals, vegetables, milk, and milk products.
Among states, Delhi and Uttarakhand reported the slowest retail inflation, at 2.18% and 2.89%, respectively, for June, followed by Punjab (3.81%), Himachal Pradesh (3.86%), and West Bengal (4.03%).
In 12 of the 22 states witnessed higher-than-average inflation, indicating retail inflation is still considerably high in several large states including Andhra Pradesh, Assam, Bihar, Karnataka, Odisha, Telangana, and Uttar Pradesh.
