India's Retail inflation marginally increased to 3.18 per cent in June from 3.05 per cent in the previous month, mainly due to rise in food prices such as grains, pulses and protein-rich items meat and fish, according to official data released by the statistics department. The retail inflation based on the Consumer Price Index (CPI) stood at 3.05 per cent in May and 4.92 per cent in June 2018. The retail inflation is on the rise since January this year.
As per the CPI data released by the Central Statistics Office (CSO), the food inflation was 2.17 per cent in June 2019, up from 1.83 per cent in the preceding month. The inflation for protein-rich 'meat and fish' category quickened to 9.01 per cent during the month (against 8.12 per cent month earlier).
For the 'pulses and products' category, the rate of price rise was sharply higher at 5.68 per cent against 2.13 per cent, while the inflation in the 'cereals and products' basket rose to 1.31 per cent from 1.21 per cent in May this year.
However, prices of fruits continued to show deflationary trend with inflation standing at (-) 4.18 per cent, while inflation in vegetables eased to 4.66 per cent. For the 'fuel and light' category, retail inflation in June slowed a tad at 2.32 per cent.
"In line with our expectation, CPI inflation remained largely benign...despite the delay in the monsoon and kharif sowing. While vegetable prices are likely to firm up in the ongoing month on the basis of seasonal factors as well as higher transport costs, the pick-up in the monsoon rainfall in the last week is likely to boost sowing in the near term, which would help keep food inflation in check," said Aditi Nayar, principal economist, ICRA.
Meanwhile, India's factory output also decelerated to 3.1 per cent in May from a revised 4.1 per cent, a month ago, the data showed. This clearly necessitates another round of rate cut by the Reserve Bank of India (RBI) in its policy review scheduled to be held in August following the Union Budget 2019.
Last month, the RBI cut policy rates by 25 basis points and changed its stance to accomodative from neutral, pointing towards more rate cuts in near future to support faltering growth momentum.
The Indian economy hit a 5-year low of 6.8% in 2018-19 while the fourth quarter growth has slumped to 5.8% which is a 17-quarter low. The economic slowdown forced the RBI to revise its growth projection for 2019-20 to 7% from the estimated 7.2% earlier.
The central bank said it expected economic growth to range between 6.4% and 6.7% during April-September, and accelerate to 7.2-7.5% during the October to March period. India’s economy grew at 6.8% in 2018-19.
"Growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy. A sharp slowdown in investment activity along with a continuing moderation in private consumption growth is a matter of concern," the Monetary Policy Committee of the RBI said in a statement.
The central bank of India mainly factors in the retail inflation while deciding the bi-monthlhy monetary policy.
(With inputs from agencies)