Retail inflation rises to 6.09% in June on account of high food prices

Retail inflation increased to 6.09 per cent in June, mainly on account of higher prices of food items, the government data showed on Monday.

Food inflation in June increased to7.87 per cent, according to Consumer Price Index (CPI) data.

The inflation figures are based on data collected from limited markets in view of the restrictions imposed on account of coronavirus pandemic, the Ministry of Statistics & Programme Implementation (MoSPI) said in a release.

The data collected, however, did not meet the adequacy criteria for generating robust estimates of CPIs at the state-level, it added.

The retail inflation based on Consumer Price Index was 3.18 per cent in June 2019.

The government had released truncated CPI data for April and May in the backdrop of the lockdown to contain Covid-19 pandemic.

According to the data, the annual inflation in cereals and related products was 6.49 per cent, and 16.22 per cent in 'meat and fish' segment. For 'pulses and products', it was 16.68 per cent, while that of spices stood at 11.74 per cent.

The inflation in vegetables basket was 1.86 per cent, while it was in negative zone for fruits. In the 'fuel and light' segment, it was 2.69 per cent.

The inflation was ruling at 6.2 per cent in rural India and 5.91 per cent in urban areas.

In view of the preventive measures and announcement of the nationwide lockdown by the government to contain spread of Covid-19 pandemic, the price collection of CPI through personal visits of price collectors was suspended.

During the lockdown, prices were collected through telephonic call from the designated outlets in selected markets, which was supplemented by information collected during the personal purchase of field staff for the items being transacted from neighborhood outlets, keeping in view the travel advisories.

As the various pandemic related restrictions were gradually lifted and non-essential activities started resuming operations, NSO collected prices from 1,030 urban markets and 998 villages, for commodities that were available and transacted in June, 2020.

The price data are usually collected from selected 1,114 urban markets and 1,181 villages through personal visits by field staff of Field Operations Division of NSO in the ministry on a weekly roster.

The headline CPI inflation rate that was released after a gap of three months posted a negative surprise, revealing an inflation rate of 6.1 per cent for June 2020, well above expectations, driven by miscellaneous items, clothing and footwear, and pan, tobacco and intoxicants, Aditi Nayar, Vice President, Icra said.

Today's print implies that retail inflation in June 2020 was higher than the level in March 2020, when the lockdown was first imposed, challenging the view that demand destruction would cool inflation despite the supply-side hiccups, she said.

"In our view, the MPC will choose to frontload its assessment of the space for further rate cuts, in a bid to support sentiment and hasten transmission amid the substantial surplus in systemic liquidity, although the decision is unlikely to be unanimous.

"We expect an asymmetric cut of 25 bps in the Repo rate and 35 bps in the Reverse Repo rate in the next policy meeting," she added.

Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services said the rise in headline CPI was mainly due to increase in food inflation, which has been rising. The inflation number is still above the RBI's upper band.

"The central bank's rate cut decision will depend on growth more than inflation figure because growth is still a worry. Going ahead, as coronavirus led restrictions slightly recover and as supply crunch reduce we may see CPI falling below 6 per cent," he said.

The Monetary Policy Committee (MPC) of the Reserve Bank mainly factors in retail inflation while arriving at key policy rates.