New Delhi: Retail inflation climbed to 4.38 per cent in June mainly due to costlier food items, pushing the rate of price rise above the Reserve Bank’s median target of 4 per cent, according to government data released Monday.
This is the first time that retail inflation has surpassed the 4 per cent mark under the new series, which came into effect from January this year.
The base year of the new series is 2024.
In June, the Consumer Price Index (CPI)-based inflation rose to 4.38 per cent from 3.93 per cent in May.
The food inflation increased to 5.32 per cent in June from 4.78 per cent in the preceding month, showed CPI data released by the National Statistics Office (NSO).
The top five items with high inflation in June were silver, gold, diamond and platinum jewellery; ginger, tomato, and raisin (kishmish) and monacca, as per the NSO data.
On the other hand, the top 5 items with low inflation were potato, peas, motor car and jeep, cumin (jeera), and motorcycle and scooter.
While the national average inflation stood at 4.38 per cent, the corresponding CPI for rural and urban areas were 4.74 per cent and 3.92 per cent, respectively.
NSO data also showed that among states, Telangana had the highest inflation (6.36 per cent) and Mizoram recorded the lowest (1.63 per cent).
The Reserve Bank of India (RBI) has the mandate to ensure CPI remains at 4 per cent with a tolerance band of 2 per cent on either side. CPI is a key element in deciding the bi-monthly monetary policy.
While leaving the benchmark rate unchanged in June, the RBI raised its inflation forecast to 5.1 per cent for 2026-27 from 4.6 per cent projected earlier. The upward revision was due to rising input costs, triggered by the pass-through of higher global energy prices to retail rates of petrol and diesel.
The next meeting of the Monetary Policy Committee (MPC), RBI’s rate setting panel, is scheduled for August 3 to 5.
Commenting on the data, Megha Arora, Director, India Ratings and Research, said Ind-Ra believes the headline inflation is likely to further rise to 4.9 per cent in July 2026 but remain within the RBI’s upper tolerance band of 6 per cent.
“Geopolitical tensions and El Nino conditions continue to remain upside risks to inflation, though some improvement in the latter could be visible in the July print, she said, and added that crude price volatility is expected to continue with oil likely to hover around USD 80/bbl in the coming weeks.
“Thus, for the next monetary policy review in August 2026, Ind-Ra expects a status quo on key policy rates; however, crude prices, monsoon, currency, and liquidity would be key indicators,” Arora said.
Dipti Deshpande, Senior Director and Principal Economist, Crisil, said India’s retail inflation crossed the 4 per cent mark for the first time since January 2025.
While both food and non-food components contributed to the increase, the latter had a larger impact.
“It is also important to note that the disinflationary support from GST rationalisation measures is likely to persist only until the end of the current quarter.
“Given these pressures, Crisil expects CPI inflation to firm up over the coming months and average 5.1 per cent this fiscal, compared with 2 per cent last fiscal,” Deshpande added.
Aditi Nayar, Chief Economist, ICRA, highlighted that the CPI inflation in June 2026, the first full month after the hikes in petrol and diesel prices, accelerated to 4.4 per cent, slightly higher than ICRA’s forecast of 4.3 per cent, led by the food and beverages, transport and restaurants divisions.
She further said ICRA expects the RBI’s Monetary Policy Committee to maintain the status quo on the policy rate in its upcoming meeting in August.
“While the material easing in crude oil prices has reduced the likelihood of an early rate hike, the renewal of tensions in West Asia warrants some caution. Additionally, more clarity is needed on the monsoon turnout, which would only be available later during the monsoon season. Consequently, any rate hike(s) is likely to be back-ended in the fiscal,” Nayar said.
NSO collects real-time price data from selected 1,407 urban markets (including online markets) and 1,465 villages covering all States and UTs.
