India’s retail inflation jumps to three-month high of 4.81% due to higher food prices

India’s retail inflation jumped to a three-month high of 4.81 per cent on account of higher food prices, but remains within the tolerable range of the Reserve Bank of India (RBI), the government data showed on Wednesday.

The surge in inflation is being attributed to a higher-than-expected supportive base, besides the rise in vegetable prices, shows the data by the Ministry of Statistics & Programme Implementation.

Last month, the inflation based on the Consumer Price Index (CPI) was at 4.31 per cent. In May it was 2.43 per cent and 7.75 per cent in June of the previous year.

The food basket accounts for nearly half of the CPI. The major elements driving inflation are cereals (12.7 per cent), eggs (7 per cent), milk (8.6 per cent), pulses (10.5 per cent) and spices. Household goods, personal care items, education and health have inflation of above 5 per cent.

Clothing and footwear recorded an inflation of 6.19 per cent, fuel and light inflation were at 3.92 per cent, and miscellaneous saw inflation of 5.19 per cent.

Inflation is an important yardstick for the RBI’s Monetary Policy Committee to determine the repo or the lending rate of the country and it is mandated to ensure that retail inflation hovers around 4 per cent with a margin of 2 per cent on either side.

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.

The next policy review is scheduled for early next month.

On the other hand, India's industrial production surged to 5.2 per cent in May from 4.5% per cent in April 2023, due to good performance by the manufacturing and mining sectors, the official data said.

The factory output growth measured in terms of IIP stood at 19.7 per cent in May 2022, mainly due to a lower base effect.

"The growth rates over corresponding period of previous year are to be interpreted, considering the unusual circumstances on account of COVID 19 pandemic since March 2020," the official statement said.