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Retail inflation at 10.02% in June

Retail inflation declined marginally to 10.02 per cent in June mainly due to lower prices of sugar and non-alcoholic beverages. Retail inflation, based on Consumer Price Index (CPI), was at 10.36 per cent in May.

‘Decline in retail inflation for urban areas in June 2012 as compared to May 2012 is attributed to higher base of the Housing Group index,’ minister of state (independent charge) for statistics and programme implementation Srikant Kumar Jena said on Wednesday.

Provisional annual inflation of June 2012 for rural, urban and combined in respect of ‘food and beverages’ are 10.41 per cent, 11.52 per cent and 10.71 per cent respectively, he said.

However certain food items like vegetables turned costlier by 27.60 per cent, followed by edible oils (16.58 per cent) and milk products (12.75 per cent) in June on annual basis.

Prices of egg, fish and meat shot up by 11.65 per cent, while pulses became costlier by 9.34 per cent.

The decline in CPI along with wholesale price index (WPI) based inflation has raised some hope of rate cut by the Reserve Bank of India later this month to promote growth. For June, WPI-based inflation dropped to 7.25 per cent from 7.55 per cent with easing prices of manufactured goods.

However experts said CPI numbers are still at elevated levels. They are in double digits which will dissuade RBI from cutting interest rate in policy review on 31 July, they said. According to the Indian minister of state (independent charge) for Statistics and Programme Implementation, Srikant Kumar Jena, provisional annual inflation of June for rural, urban and combined in respect of ‘food and beverages’ stood at 10.41 per cent, 11.52 per cent and 10.71 per cent respectively.

Experts said that looking ahead, the biggest risk to consumer price index (CPI) is the outlook on food prices, which forms around 43 per cent of the CPI basket.

These are likely to remain under pressure due to the recent increase in minimum support prices and shortfall in monsoon rains.

Nomura economist Sonal Varma said from a policy perspective, the RBI does not rely solely on the CPI series due to its limited history. However, this is an important input as it reflects inflation faced by households, and as such, suggests that it is too early to lower the guard on inflation.

‘We expect all policy rates to be left unchanged on 31 July,’ Varma added.

As for WPI inflation, it declined in June to 7.25 per cent from 7.55 per cent with easing prices of manufactured goods.
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