CPI-based inflation rose to 4.81%, food inflation to 4.49% in June

The IIP growth rate for the month of May came at 5.2%, according to the government release

India's retail inflation rose to 4.81 per cent in June from 4.31 per cent in May, data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Wednesday showed. The food inflation saw a sharp rise to 4.49 per cent from 2.96 per cent in May. 

The inflation is, however, lower than 7.01 per cent in June 2022. 

The inflation was mainly driven higher by food and beverages where the consumer price index (CPI) rose to 183 in June from 179.1 in May. In the pan, tobacco, and intoxicants category, the index remained stable at 201.4 as compared to 201. 

Aditi Nayar, Chief Economist, Head - Research & Outreach, Icra Ltd said, "A less supportive base and the onset of the spike in vegetable prices pushed up the CPI-based inflation to a higher-than-anticipated 4.8 per cent in June 2023, arresting the welcome cooling seen in the previous four months. Icra had forecast the June 2023 CPI inflation at 4.7 per cent."

 

"While food and beverages and miscellaneous items drove the sequential uptick in the YoY CPI-based inflation in June 2023, clothing and footwear, housing, and fuel and light recorded a decline."

"The spike in vegetable prices is set to push the CPI-based inflation to an uncomfortable 5.3-5.5 per cent in July 2023. We expect the vegetable price shock to result in the Q2 FY2024 CPI inflation exceeding the MPC's last forecast of 5.2 per cent. Accordingly, we anticipate that the Committee will retain its hawkish tone in August 2023, keep the repo rate unchanged and signal that a pivot to rate cuts remains distant."

In the clothing and footwear category, the index rose marginally from 186.2 to 186.9 in June. The housing sector saw a dip in the index to 174.4 in June from 175.6 in May. 

The fuel and light category saw a marginal rise from 182.8 to 182.9 in June. 

The data also showed that the Index of Industrial Production (IIP) growth rate for the month of May came at 5.2 per cent as compared to 19.7 per cent last year. In April and May, the IIP was 4.8 per cent.

Nayar further said. "The IIP growth rose to a three-month high of 5.2 per cent in May 2023, in line with our expectations, led by all the use-based industries except consumer non-durables and infra/construction goods. 

The YoY performance of several high-frequency indicators related to freight and traffic movement deteriorated in June 2023 relative to May 2023 such as generation of GST e-way bills, cargo traffic at major ports, rail freight traffic, petrol and diesel sales, PV and 2W production as well as vehicle registrations. However, the YoY growth in electricity generation, output of Coal India Limited, and finished steel consumption improved in June 2023, relative to the previous month. Based on these trends, ICRA expects the YoY IIP growth to moderate to around 3-4 per cent in June 2023."