Consumer Price Index-based inflation (CPI) for the month of June rose 6.26 percent, as food prices hardened further, and transportation costs rose due to higher petrol and diesel prices.
The June print is slightly lower than 6.30 percent for May, which was the highest in six months. June is the second consecutive month when headline retail inflation is above the Monetary Policy Committee's inflation targeting range of 4 (+/-2) percent.
"The CPI inflation for June 2021 offered a modicum of relief, despite a pickup in food inflation and rising retail fuel prices," said Aditi Nayar, Chief Economist with ICRA Ltd.
"The month-on-month uptick in the CPI inflation eased to 0.6 percent in June 2021 as the phased unlocking commenced at the state level, from the sharp 1.6 percent in the previous month, adding heft to the argument that the latter was largely transitory," Nayar said.
Food inflation (CFPI) came in at 5.15 percent in June, compared with 5.01 percent in May, as food prices continued to remain inflated, official data by the National Statistical Office showed on July 12. Inflation for the 'fuel and light' sub-group rose 12.7 percent compared to 11.6 percent in May.
Among the sub-groups, egg prices rose by 19.4 percent while those of oils and fats rose by nearly 35 percent. Fruits saw nearly a 12 percent jump in inflation.
Inflation in transport and communication rose by 11.6 percent, while health costs continued to grow, registering an inflation of 8 percent.
"While the low base continued to impact the YoY headline print, the sequential increase has been much more muted than the sharp surge seen in May. Specifically core inflation is down to 6.19 percent from 6.36 percent earlier, with almost negligible sequential increase," said Madhavi Arora, Lead Economist with Emkay Global.
"Following today's CPI inflation print, we expect the inflation forecasts to be revised upwards in the next MPC review, amid a status quo in the rates and stance, albeit with an underlying tone of uneasiness in the commentary," said Icra's Nayar.
She said that the tussle between supporting the nascent, incomplete revival in growth and preserving the anchoring of inflationary expectations will continue. "If the CPI inflation remains entrenched above the 6 percent upper threshold in the next two prints (July-August 2021), a preponement of rate normalisation can't be ruled out," Nayar said.