In June 2023, retail inflation reached a three-month high of 4.81 percent. Will it continue to rise in the coming months? Here’s everything you need to know.
In short:
retail inflation reached a three-month high of 4.81 percent in June 2023.
Inflation may grow further in the following months.
July inflation is expected to rise sharply, according to economists.
According to the India Today Business Desk: Retail inflation rose to a three-month high of 4.81 percent in June 2023, owing mostly to a strong increase in food prices.
The Consumer Price Index (CPI), a major indicator of retail inflation, stood at a revised 4.31 percent in May 2023, down from 7% the previous year.
Despite this increase, inflation remains within the Reserve Bank of India’s (RBI) 2-6 percent tolerance threshold.
However, experts warn that retail inflation may rise in the following months as a result of significant price increases in a variety of food goods such as cereals, vegetables, fruits, milk, and meat.
Unpredictable weather patterns, characterized by irregular and excessive rains, are predicted to harm agricultural productivity and raise food costs. As a result, inflation may rise in the next months.
Inflation will continue to grow
According to Aditi Nayar, an economist at ICRA, “a less supportive base and the onset of the spike in vegetable prices pushed up CPI inflation to a higher than anticipated 4.8 percent.”
She went on to say that high vegetable prices are likely to continue in July, perhaps pushing retail inflation to a “uncomfortable 5.3-5.5 percent” during the month.
Economists estimate that the impact of increasing food costs will be felt until August, when it will begin to cool.
Economic consequences
High retail inflation can have far-reaching consequences for the economy. High inflation rates can limit customers’ purchasing power, resulting in lower consumer spending and corporate sales.
This can result in excess inventory and dead stock, resulting in revenue loss for firms.
Furthermore, excessive inflation can distort purchasing power over time for fixed-interest rate receivers and payers, lowering the actual income of some consumers.
