Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research
"India's headline CPI inflation for June'22 has been largely on expected lines at almost the same level of 7.01% YoY as seen in the previous month albeit with a lower sequential growth of 0.52%. The threat of a further increase in the print has been mitigated by some of the steps taken by the government which includes the second excise duty cut on diesel and petrol prices.
Out of 12 sub-categories in food, 10 categories have seen a sequential increase in Jun'22 except for edible oil and fruits. The reduction of supply challenges in case of imported edible oil, lower international prices, and imports at lower duties have helped to moderate domestic prices which are expected to go down further in the near term. With a pick-up in monsoon, we however believe that food inflation should be range-bound in the current fiscal.
Core inflation has continued to be sticky at 6.22% YoY albeit it has been virtually negligible on a sequential basis. This indicates that the pass-through by manufacturers has remained limited and may continue to be that way unless there are stronger demand signals.
While the continuing depreciation of the rupee has raised the risks of imported inflation, some steps taken by the government such as an increase of crude imports at a discount from Russia and by RBI to conserve foreign exchange may help to address such risks. Overall, the current picture of inflation raises hopes of a gradual moderation going forward and the Q1 average being lower than the 7.5% forecast by RBI. This may slow down the pace of rate hikes in the current year."