India’s retail inflation jumps to 4.81% in June due to surging food prices

India’s retail inflation hardened to 4.81% in June from 4.31% in May, driven by a spike in food price inflation faced by consumers which rose to 4.5% from less than 3% in the previous month, government data showed on July 12.

India's retail inflation snapped a four-month decline and grew 4.81% in June as food prices surged, showed government data on Wednesday. This indicates that a reduction in interest rates is unlikely to occur soon. In May, India's CPI inflation rate was 4.31%.

There are shortages of staple components for cooking, such tomatoes, chillies, and onions, as a result of uneven monsoon rains that have harmed crops of some perishable items and impeded the flow of products.

Food inflation increased to 4.49% from a revised 2.96% in May, making up over half of the total consumer price basket. In June, monthly vegetable price increases were 12% higher than in May. 

The pressure on food prices is likely to persist over the coming months, making it less likely that inflation would return to Reserve Bank of India's 4% target in the near term. The index of industrial production in India rose 5.2% in the month of May from 4.2% in April and 19.7% a year ago.

The central bank mainly factors in the CPI to arrive at its bi-monthly monetary policy decision. The next policy review is scheduled early next month. 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.