Ginger recorded the steepest annual price increase at 50.41 per cent, while tomatoes, raisins and precious metals also witnessed elevated inflation, while gold and silver jewellery continued to post elevated inflation
As elevated food and fuel prices, geopolitical tensions in West Asia and concerns over an uneven monsoon kept price pressures firm, India’s headline inflation rose to 4.38 per cent in June, as compared with 3.93 per cent in May. The official data released by the Ministry of Statistics and Programme Implementation (MoSPI) showed that the latest consumer price index (CPI) reading breached the Reserve Bank of India’s medium-term inflation target of 4 per cent after over a year.
The uptick in the June reading was led by a rise in retail food inflation, which stood at 5.32 per cent in June compared with 4.78 per cent in May. Rural food inflation stood at 5.45 per cent, while urban food inflation came in at 5.09 per cent.
“This acceleration highlights a widening divergence between rural and urban consumption costs, with rural inflation climbing sharply to 4.74 per cent while urban areas remained comparatively contained at 3.92 per cent. From a policy perspective, this uneven trajectory indicates that underlying price pressures are shifting back toward the broader rural economy, which complicates broad-based growth projections,” stated Shashwat Singh, Fundamental Analyst, Bajaj Broking.
Food Inflation Trends
The increase in headline inflation was driven by higher prices of food items, particularly ginger, tomato and raisins, while precious metals such as silver and gold jewellery continued to record elevated inflation. Among the food items, ginger recorded the sharpest increase in prices, with inflation rising to 50.41 per cent in June from 32.50 per cent in May 2025. Similarly, tomato inflation stood at 31.92 per cent year-on-year (YoY), while raisin (kishmish) and monacca inflation stood at 20.52 per cent.
“While headline inflation remains within the Reserve Bank of India’s tolerance band, sustained pressures in food inflation warrant continued policy attention”, noted Rajeev Juneja, President, PHD Chamber of Commerce and Industry (PHDCCI).
On the other hand, prices of several items remained lower than a year ago. Potato prices came down 20.34 per cent, followed by peas (-9.67 per cent), cumin (jeera) (-3.75 per cent). Telangana recorded the highest rate of inflation at 6.36 per cent, followed by Andhra Pradesh at 5.39 per cent. The year-on-year housing inflation rate for June 2026 was 2.10 per cent and the corresponding inflation rates for rural and urban were 2.66 per cent and 1.90 per cent, respectively.
The reading comes weeks after the Reserve Bank of India left the repo rate unchanged at 5.25 per cent in its recent monetary policy committee (MPC) meeting. The apex bank also retained its neutral policy stance.
“Looking ahead, uneven rainfall so far, a below-normal monsoon forecast, and the onset of El Niño conditions could put pressure on food prices. Crisil’s Deficient Rainfall Impact Parameter (DRIP index) also indicates building stress across most crops barring coarse cereals, soybean, and sugarcane,” stated Dipti Deshpande, Senior Director and Principal Economist, Crisil.
Concerns On Non-food Side
While food inflation contributed around 185 basis points (bps) to headline inflation, non-food inflation contributed around 250 bps, Deshpande added. On the non-food side, although global crude oil prices have eased from recent peaks, they remain significantly higher year-on-year. Crisil Intelligence added that Brent crude prices are expected to average USD 82 to 87 per barrel this fiscal, roughly 20 per cent higher than a year ago. Higher domestic fuel prices are also likely to exert broader inflationary pressure as rising input and transportation costs are passed through the economy.
“The inflation trajectory remains vulnerable to surprises, given the ongoing risk from the West Asia conflict and the monsoon still tracking below normal. Our base case currently expects inflation to average around 5 per cent in FY27, which should give the RBI room to remain on pause at the August policy meeting and await greater clarity on the growth-inflation trade-off before deciding its next move,” highlighted Vikram Chhabra, Senior Economist, 360 One Asset.
CareEdge Ratings added that the rise in transport inflation was broadly in line with expectations, reflecting the upward revision in retail fuel prices. Meanwhile, the second-round effects of the sharp increase in LPG prices between March and May contributed to higher inflation in restaurant and accommodation services. Overall, around 65 per cent of the increase in headline inflation can be attributed to higher energy prices, including increases in retail fuel prices, utility tariffs and restaurant service costs, the report mentioned.
Way Forward
Looking ahead, the inflation outlook remains subject to risks from external uncertainties and weather-related disruptions. The US-Iran Memorandum of Understanding (MoU), signed in mid-June, initially eased concerns in global markets, but the relief proved short-lived as renewed geopolitical tensions resurfaced. Although the recent correction in global crude oil prices offers some respite, Brent crude prices continue to remain volatile, CareEdge Ratings pointed out.
Icra highlighted the MPC is expected to maintain the status quo on the policy rate in its upcoming meeting in August 2026. While the material dip in crude oil prices has reduced the likelihood of an early rate hike, renewal of tensions in West Asia warrants some caution, the report noted. The future trajectory of policy rates will largely depend on the MPC’s assessment of evolving growth-inflation dynamics.
