India's retail inflation rate rose for the first time in five months in June due to a sharp rise in food prices, government data showed on Friday.
Annual retail inflation (INCPIY=ECI) was 5.08% in June, up from 4.75% in May. Economists polled by Reuters had forecast inflation at 4.80%.
Prices of food, which account for nearly half of the retail inflation, rose 9.36% from last year in June compared to an 8.69% rise in May. Food prices have been accelerating at more than 8% year-on-year since November 2023.
Vegetable prices rose 29.32% in June against 27.33% in the previous month, as extreme heat and heavy floods in India's northern states disrupted agricultural production.
"The heatwave impact has been seen on vegetables ... These products will continue to witness high inflation," said Madan Sabnavis, economist at Bank of Baroda.
Higher rural inflation coupled with food prices "is a cause of concern both for consumption and investment growth," said Devendra Pant, an economist at India Ratings.
For June, rural inflation was 5.66% compared to 4.39% in urban areas, government data showed.
Inflation rate for cereals was 8.75% in June compared to 8.69% in the previous month, while that of pulses eased to 16.07% from 17.14%.
Core inflation, which strips out volatile food and energy prices, continued to hover around 3% and was estimated between 3.08% and 3.14% in June from 3.12% in May, according to three economists. The Indian government does not release core inflation data.
High food prices have led to the Reserve Bank of India (RBI) keeping its key interest rate unchanged at 6.50% for eight consecutive meetings.
RBI Governor Shaktikanta Das on Thursday said it will be too early to talk about a change in the monetary policy stance till inflation is somewhere close to the central bank's 4% target.
"Any rate action can be considered only in October, and will be heavily data dependent," Sabnavis said.
