Prices of certain daily commodities have increased in the last three months, with the food inflation accelerating to 2.4% in June 2019 from 2% in May. Not only this, consumers have more to worry as food items would continue to get costlier due to uneven rainfall, the RBI said in its Monetary and Credit Policy statement. “Uneven spatial and temporal distribution of monsoon could exert some upward pressure on food items,” RBI said. However, with recent catch up in rainfall, the risk is expected to be mitigated, India’s central bank said.
Inflation was caused by “a sharp pick up in prices of meat and fish, pulses and vegetables” and cereal, milk, spices and prepared meal prices also witnessed an uptick. The previously seen inflation in eggs and non-alcoholic beverages softened. There was negative inflation in some of the items, meaning, prices actually fell for products such as fruits, and sugar and confectionery.
Retail inflation, measured by the Consumer Price Index, has also seen an increase from the previous month. While the April-May inflation stood at 3%, the same was up to 3.2% in June. Hike in food prices and the resultant food inflation drove this, said RBI, even when fuel inflation and CPI inflation excluding food and fuel eased. Other daily use items such as fuel and light have also gone moderation in June and electricity is moving into deflation.
In the previous bi-monthly meet held in June 2019, RBI had said that ongoing demand slowdown led to a significant reduction in inflation. It was expected that with the ensuing demand slowdown, inflation will remain subdued for the next year.
Meanwhile, the commerce body FICCI welcomed RBI’s 35 basis points cut in the repo rate and said that the body is hopeful of an improvement in the health of the economy in the months ahead, FICCI President Sandip Somany said. The commerce body has also asked for targeted interventions in key sectors such as telecom, real estate, automobiles, textiles and NBFCs as these sectors reel under stress.
RBI has cut the policy rate by 110 basis points in the current calendar year and in the meeting held on Wednesday, the apex bank body revised the rates for the fourth time in a row.