Jun urban inflation eases to 6.92%, rises modestly in rural India

The June data confirms the fact that peak in India has passed.

Supply side factors are currently responsible for almost two-thirds of the current elevated level of CPI inflation, the Ecowrap said. This in part reflects supply constraints from continued global supply disruptions related to the pandemic and the war in Ukraine.

Demand factors contribute only a third to CPI inflation.

In India, CPI inflation attributable to supply side factors has started moving up after September 2021, while demand led CPI remained more or less constant. The two have been moving together post February this year since the Russia-Ukraine conflict began.

However in the recent months demand led CPI inflation has moved up a bit, while supply led CPI inflation continues to moderate.

Clearly, the RBI may have to raise rates further though, the clear downward trend in inflation attributable to supply side factors bodes quite well for inflation trajectory going forward.

Core CPI also moderated in June to 5.96 per cent compared to 6.09 per cent in May.

The moderation in inflation in the last two months has been possible because of the various steps taken by the government, including cut in taxes on petrol and diesel, restrictions imposed on food exports, a cut in cement prices and a global meltdown in commodity prices, the Ecowrap said.

However in the recent month demand CPI has moved up a bit, while supply CPI continues to moderate. Clearly, the Reserve bank of India may have to raise rates further though, the improvement in inflation attributable to supply side factors bodes well for inflation trajectory going forward, the Ecowrap added.

ALCHEMPro News Desk (DS)