Retail inflation hits eight-month high in June

The food inflation for the month is also estimated to be little changed at 1.8 percent to 1.9 percent, as compared to 2 percent in the previous month, resulting from higher vegetable prices.

India's retail inflation for June came in at an eight-month high at 3.18 percent from 3.05 percent in May, on the back of an increase in prices of pulse. If the consensus forecast is realised, retail inflation will be below the RBI's medium-term target of 4 percent. "The RBI will continue to maintain its accommodative stance and could do another 25-50 basis points rate cuts in this financial year", said Sujan Hajra, chief economist at Anand Rathi Securities.

The Consumer Price Index-based (CPI) inflation for June and the Index of Industrial Production (IIP) data for May are due to be released later on Friday.

The Reserve Bank of India mainly factors in retail inflation while deciding the bi-monthly monetary policy.

A reading below the RBI inflation target will likely support the RBI's decision last month to cut interest rates to boost economic growth.

Gross domestic product grew 5.8% annually in the January-March quarter, the slowest in more than four years and well below the rate needed to create jobs for millions of young Indians entering the labour market each month.

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The combination of low growth and low inflation is particularly hard for farmers, who benefit from higher food prices.

The retail Inflation is expected to be in the range of 2.9 percent and 3.7 percent, as compared to 3.05 percent in the previous month.

Food prices - which constitute almost half of the inflation basket - have steadily risen since March after contracting from October last year to February this year.

In another set of data released by the government, industrial output growth slipped to 3.1 per cent in May mainly on account of subdued performance of mining and manufacturing sectors.

The RBI has raised its inflation outlook for April-September to 3.0-3.1% from its April outlook of 2.9-3.0%.

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