This the third straight month when the inflation numbers have stayed above 7 per cent and the sixth month in a row when the figures have remained above Reserve Bank of India’s (RBI) tolerance band of 2-6%.
The RBI mainly factors in retail inflation while arriving at its bi-monthly policy.
Reserve Bank’s monetary policy committee (MPC) has been tasked by the government to tame retail inflation based on consumer price index (CPI) at 4% (+,-2%).
A substantial rise in food and fuel prices — owing to Russia’s invasion of Ukraine — had pushed up India’s overall inflation to 8-year high of 7.79%. It was partly contained in May after the government cut taxes on petrol, diesel and imposed restrictions on food exports.
However, food inflation, which accounts for nearly half the CPI basket, has been rising at the fastest pace in 2 years. Inflation in the food basket in June 2022 was 7.75 per cent, compared to 7.97 per cent in the previous month.
The RBI has raised interest rates by 90 basis points so far this year to 4.9% and is set to add more in coming months.
Recently, RBI governor Shaktikanta Das said inflation was unlikely to fall within the top end of its mandated target band until December.
“Global geopolitical situation remains fluid and commodity markets remain on the edge, rendering heightened uncertainty to the domestic inflation outlook,” he had said.
Even though CPI numbers have eased since April, widening trade and current account deficits due to high global crude oil prices pushed the rupee to record lows against the US dollar. Thereby, raising concerns over higher imported inflation.
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