June retail inflation hits 5-month peak of 5%, industrial growth slows

NEW DELHI:

Inflation

based on consumer price index (CPI), or

retail inflation

for the month of June came at 5 per cent, government data showed on Friday, driven mainly by higher oil prices and a depreciating rupee.


In May, the inflation stood at 4.87 per cent. The inflation rate came below expectation as a Reuters poll of economists had predicted it to come at 5.3 per cent.

The index of industrial production (

IIP

) came at 3.2 per cent, down from 4.9 per cent in April.

The numbers mean, inflation has now stayed above the Reserve Bank of India's (RBI) 4 per cent target for an eighth straight month. The hike in inflation may also cement expectations for the central bank to raise rates as early as August after its 25 basis points hike last month to try and control potential risks caused by higher inflation.

Global oil prices, which have risen more than 20 per cent this year and nearly 13 per cent in June, was a major factor behind higher inflation in recent few months as it is India's costliest import.

A recent increase in government-mandated prices is currently predicted to add Rs 15,000 crore to the government's costs, raising concerns over inflation remaining elevated over the coming months.

Indranil Pan, group economist of IDFC Bank, told news agency Reuters that rupee depreciation was likely to push up prices of inputs for manufacturers, which would be reflected in higher retail prices, and the central bank would be guided by inflationary concerns.

“We are expecting the RBI to raise the policy rate two more times in the current financial year,” he added.

The RBI’s next policy review is on August 1.


Ready to Master Stock Valuation? ET’s Workshop is just around the corner!