Surging food prices accelerated India's annual retail inflation rate in June, snapping four months of easing and erasing any chance of a rate cut by the central bank this year.
June retail inflation rose to 4.81%, higher than both the revised 4.31% for the previous month and the 4.58% expected in a Reuters poll of 55 economists.
Food inflation, which accounts for nearly half of the overall consumer price basket, rose to 4.49% against a revised 2.96% in May.
Erratic and incessant rainfall in northern India could push vegetable prices higher in the coming months. They increased 12% on a month-on-month basis in June.
"A less supportive base and the onset of the spike in vegetable prices pushed up the CPI inflation to a higher than anticipated 4.8%," said Aditi Nayar, economist at ICRA.
Prices of vegetables will remain high in July and may push retail inflation to an "uncomfortable 5.3%-5.5%" this month, Nayar added.
Tomato prices in particular rose sharply, leading to fast food chain McDonald's dropping them from its burgers and wraps in many areas of India.
Core inflation, which strips out volatile food and energy prices, remained below 6% for a fourth consecutive month.
According to three economists' estimates, core inflation was between 5.1% and 5.4% in June, compared with 5.02% in May.
The Indian government does not release figures of core inflation.
Last month, the Reserve Bank of India kept its rates on hold for the second straight meeting, saying it would focus on anchoring inflation close to 4%, the mid-point of its 2%-6% target range. Economists polled by Reuters expect rates to remain on hold through 2023.
"We expect the monetary policy committee to see through the short-term spike in food inflation and remain on prolonged pause," said Garima Kapoor, economist at Elara Capital.
