Retail inflation eases in June to 7.01%, but still above RBI’s upper limit

India’s retail inflation marginally eased for the second month in a row to 7.01% in June from a year ago, official data on Tuesday showed, but consumer prices, which rose 7.04% in May, continued to breach the Reserve Bank of India’s upper limit of 6% for the sixth straight month.

The keenly watched food price index leapt 7.75% on the back of a global spiral in commodity prices, slightly lower than 7.97% in the previous month. India is a net importer of edible oil, whose prices moderated in July after reaching record highs.

Inflation globally has hit record high levels in decades, with Russia’s invasion of Ukraine pushing up prices of everything – from energy to food – squeezing households. A Reuters poll earlier showed that India’s inflation will hold above the central bank’s tolerance band of 2-7% for the full year, making interest rate hikes more likely. A Bloomberg poll of 38 economists estimated June’s retail inflation at 7.1%.

Food items were costlier in urban India, where inflation stood at 8.04%, although they were even higher in May at 8.20%. In rural India, food prices rose 7.61%. Higher food prices tend to hit poorer households more because, as a proportion of their monthly budgets, the poor spend more on food.

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In the food and beverages category, consumers saw a sharp rise in vegetable prices, which soared to 17.37%, while that for meat and fish rose to 8%. Fruits saw a relatively moderate rise at 3%. In the packaged meals, snacks and sweets category, a proxy for restaurant costs, it rose to 6.67%, while inflation in oils and fats was at 9.36% compared to 13.26% in May.

In the non-food category, clothing and footwear inflation rose to 9.52%. Commuting costs increased by 6.90%, while housing inflation in June stood at 3.93% compared to 3.71% in the previous month.