Retail Inflation eases to 29-month low at 7.31% in June; Core inflation softens too

In yet another encouraging development after four month low headline inflation numbers, provisional annual inflation rate based on all India general Consumer Price Index (CPI) (Combined) softened to 29 month low of 7.31% in June, as compared to 8.28% in May and 9.87% during the same month previous year. The figure was lower than street expectation of around 7.45% for the month under review.

CPI numbers of June 2014 for Rural, Urban and Combined stood at 142.3, 139.4 and 141.0 respectively. The corresponding provisional inflation rates for rural and urban areas for June 2014 stood at 7.72% and 6.82% as compared to 7.55% and 8.28% respectively in the previous month. 

Meanwhile, newly introduced Consumer Food Price Indices (CFPI) for rural, urban and combined stood at 145.2, 144.3 and 144.9 respectively for June 2014. Further, the provisional annual inflation rate based on all India CFPI (combined) for the month of June, 2014 on point to point basis (June 2014 over June 2013) also eased at 7.97% as compared to 9.56% (final) for previous month of May 2014. While, the corresponding provisional inflation rates for rural and urban areas for June 2014 stood at 8.68% and 6.57% respectively as compared to 10.27% and 7.98 % respectively in May ,2014.

Food prices for consumers rose at 7.90% in last month from a year earlier, lower than May’s 9.40% rise.  The Provisional annual inflation rates of June 2014 for Rural and Urban in respect of ‘food and beverages’ stood at 8.54% and 6.65% compared to 10.04% and 7.89% respectively in May, 2014. Additionally, Provisional annual inflation rates (Combined) for Fuel and light; Clothing, bedding and footwear stood at 4.58% and 8.65% respectively for the month under review. 

In further encouraging sign, Core inflation too came down 7.4% as compared to 7.74% in May. Thus, the latest data, which clearly indicates for worst now being behind us, is likely to add to the cheer for new Prime Minister Narendra Modi, which has listed fighting inflation, particularly food inflation, as his topmost priority. However, the assumption of  rate cut by RBI on latest set of data, could run into trouble on prevailing concerns about poor monsoon, which could significantly hit food inflation, with turmoil in Iraq has also increasing the possibility of risk of rising food and fuel prices.