New Delhi: India’s retail inflation, measured by the Consumer Price Index (CPI), rose to 4.38 per cent in June, driven mainly by higher food prices following the delayed onset of the southwest monsoon. The latest reading marks the fastest pace of retail inflation in the past 18 months.

The increase comes after inflation eased to 3.93 per cent in May, remaining close to the lower end of the Reserve Bank of India’s (RBI) target range of 2 to 6 per cent.

Food inflation pushes headline CPI higher

The rise in food prices was the primary contributor to the increase in headline inflation during June.

Inflation in the food and beverages category rose to 5.32 per cent, up from 4.78 per cent recorded in May.

Economists attribute the increase to supply disruptions and higher prices of essential food items during the delayed arrival of the monsoon, which affected seasonal availability in several regions.

Rural inflation outpaces urban areas

The impact of rising prices was more pronounced in rural India.

Rural inflation increased to 4.74 per cent in June from 4.25 per cent in May, reflecting stronger price pressures on households outside urban centres.

Meanwhile, urban inflation also edged higher, rising to 3.92 per cent from 3.53 per cent in the previous month.

The data suggests that inflationary pressures were broad-based across both rural and urban areas, although rural consumers experienced a sharper increase.

Core inflation also edges higher

Core inflation, which excludes volatile food and fuel prices and is considered an indicator of underlying price trends, also increased during the month.

It rose to 4.1 per cent in June from 3.8 per cent in May, indicating that price pressures are extending beyond food and energy categories into the broader economy.

The rise in core inflation will be closely watched by policymakers as they assess the inflation outlook and monetary policy trajectory.

Personal care records steepest increase

Among the various expenditure categories, the personal care and miscellaneous segment recorded the highest inflation rate at 16.72 per cent, making it the fastest-rising component of the consumer basket.

Inflation in restaurants and accommodation services stood at 6.91 per cent, while the paan, tobacco and intoxicants category recorded inflation of 4.83 per cent.

Other categories witnessed relatively moderate price increases. Inflation in recreation, sport and culture was recorded at 1.75 per cent, while the information and communication segment registered a marginal increase of 0.43 per cent.

Inflation remains within RBI’s target band

Despite the increase, retail inflation continues to remain within the RBI’s medium-term target range of 2-6 per cent.

However, the uptick in food and core inflation may influence future assessments by the central bank regarding inflation risks and monetary policy.

Market participants will continue to monitor monsoon progress, food supply conditions and global commodity prices, as these factors are expected to play a key role in determining the inflation trajectory over the coming months.