CPI Inflation June 2023: India’s retail inflation in the food basket jumps to 4.63 per cent in June 2023, compared with 2.91 per cent in May
India’s retail inflation in June 2023 increased to 4.81 per cent after declining for five months, according to the latest official data released on Wednesday. The increase in the inflation rate has been recorded due to fading favourable base and higher vegetable prices in the country. Meanwhile, India’s industrial production, based on the IIP, rose 5.2 per cent In May 2023.
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At 4.81 per cent, the retail inflation in June 2023 remains within the Reserve Bank of India’s (RBI) tolerance band of 2-6 per cent for the fourth month in a row.
According to the latest data from the National Statistical Office, the retail inflation in the food basket jumped to 4.63 per cent in June 2023, compared with 2.91 per cent in May.
CPI inflation in June 2022 had stood at 7 per cent. The CPI inflation in May had fallen to a 25-month low of 4.5 per cent, compared with 4.7 per cent in April, 5.66 per cent in March, 6.44 per cent in February, and 6.52 per cent in January. In December 2022, the CPI inflation had stood at 5.7 per cent.
On the RBI’s likely policy decision in August after the latest CPI inflation, Suvodeep Rakshit, senior economist at Kotak Institutional Equities, said, “The RBI will remain cautious and we continue to expect the RBI to remain on an extended pause as it watches for the domestic growth-inflation mix and global monetary policy decisions.”
He added that overall, there are upside risks to CPI inflation over the next few months as monsoon-related risks on food prices play out. “June CPI inflation at 4.81 per cent was slightly higher than expectations with vegetable prices spiking up in June along with some increase in pulses prices. This trend in vegetable prices continued in July too. Core inflation was broadly unchanged at 5.1 per cent but will likely moderate over the next few months.”
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.
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Rating agency ICRA Chief Economist Aditi Nayar also expects that RBI MPC to retain its hawkish tone in August 2023, keep the repo rate unchanged and signal that a pivot to rate cuts remains distant.
IIP Growth At 3-Month High of 5.2% In May 2023
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. Mining output rose 6.4 per cent during the month under review. Power output grew 0.9 per cent in May 2023.
Aditi Nayar, chief economist and head (research & outreach) at ICRA, said, “The IIP growth rose to a three-month high of 5.2% in May 2023, in line with our expectations, led by all the use-based industries except consumer non-durables and infra/construction goods.”
She added that the YoY performance of several high-frequency indicators related to freight and traffic movement deteriorated in June 2023 relative to May 2023 such as the 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.
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“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 about 3-4 per cent in June 2023,” Nayar added.
