Inflation has been a concern for India and the world for quite some time now. While the overall CPI inflation was coming down in the previous months, in June, due to a surge in vegetable prices, the India CPI inflation rate again increased beyond 5%. In May, the CPI inflation in India was at 4.75% as per data received from the Ministry of Statistics and Programme Implementation. Since the beginning of 2024, the rate of inflation in India has been decreasing consistently. However, in June, it rose again driven by the exponential surge in vegetable prices which are a necessity. Economists are estimating July’s inflation to drop again to around 4.8%.
What is pushing the inflation up?
Vegetable prices in India witnessed a whopping 29.32% rise in the month of June compared to the corresponding period last year. Also, it surged higher than the prices in May which rose around 27.3%. On a month-on-month basis, the vegetable prices in June increased by a whopping 14% which mainly pushed the CPI inflation in India higher.
Apart from vegetable prices, another reason for the surge in the rate of inflation in India is the 8.36% rise in the food and beverage prices in the country. The food and beverages prices even surged higher than May’s 7.9% surge.
If you look at the core inflation data, which excludes volatile food and fuel, then the same has also gone up to 3.15% in June from 3.12% in May.
Factors driving vegetable prices
Drastic changes in the climatic conditions since the previous year have damaged vegetables to the core. This has been one of the primary reasons for the rise in vegetable prices. The prolonged extreme heatwaves across the country took a toll on vegetable prices in the country. The food and beverages prices are also back above 8% driven by the slowdown in the southwest monsoon.
As kharif crops are sowed in July, at least 50% of the entire produce, adequate rainfall in the regions where these crops are sowed is necessary. However, the weak start to the monsoon made the market worry thus pushing the vegetable prices above. The next few weeks are crucial for sowing the seeds and thus good rainfall can help in the same and turn, can bring the prices of the vegetables down significantly.
While adequate rainfall is needed for vegetable prices to go down, excessive rainfall leading to flooding and water-clogging can make the situation worse. As per forecasts, this year, rainfall should be above average level but some of the states may face severe situations due to extreme rainfall.
Other important inflation data in June
| Items | June Inflation (%) | May Inflation (%) |
| Cereals | 8.75 | 8.7 |
| Meat and Fish | 5.39 | 7.3 |
| Eggs | 3.99 | 7.6 |
| Milk and milk products | 3 | 2.6 |
| Oils and fats | 2.68 | 6.7 |
| Pulses | 16.07 | 17.1 |
| Clothing and footwear | 2.73 | 2.7 |
| Housing | 2.69 | 2.6 |
With the rise in inflation again in June, rate cuts can be further postponed. This can affect the market adversely however, the July retail inflation forecast by economists suggests inflation easing in July which can be a silver lining.
Source: https://www.ndtvprofit.com/
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