Notably, the latest CPI data has breached the upper band of the Reserve Bank of India (RBI) inflation target of 4% with +/- 2%.
CARE Ratings in its note informed, “There has been a broad-based increase across segments in June 2020 when compared with June 2019 whereas month on month the inflation has risen in all segments barring food and beverages, housing and miscellaneous”.
On segment-wise performance, the inflation rate for Food and beverages stood at 7.29%, while the inflation rate for Pan, tobacco and intoxicants was at 9.70%.
While the inflation rate was at 3.53% in clothing and footwear, 3.55% in housing and 2.69% in fuel and light. A 5.70% inflation rate was witnessed in miscellaneous.
For the upcoming month, CARE says, “In the month of July 2020, the Unlock 2.0 has been initialized which has loosened coronavirus-led restriction in most parts of country. This led to a slight recovery in economic activities helping curb supply crunch faced initially. This will aid in lowering the pricing pressures emanating from supply disruptions. However, upside to the inflation could emanate from further upward revision in the fuel and diesel prices as well personal care segments”.
With inflation surpassing upper band of 6% in June 2020, CARE adds, “the RBI may hold the interest rate at current level in its upcoming monetary policy review though admittedly it has clearly stated that growth was the prime driver of policy. However, given surplus liquidity in system and lower interest rates a pause may be in order”.
