Consumer prices rise at highest annual rate since 2012

Double whammy for economy as retail inflation touches 5-month high, factory output slows

India's consumer price inflation rate continued to rise, and was at 5.00% in June, data released by the Ministry of Statistics and Programme Implementation showed on Thursday.

The government has mandated the Reserve Bank of India to keep inflation at 4 per cent, with a margin of 2 per cent on either side. The RBI's next policy review is on August 1.

Inflation in clothing and footwear in June stood at 5.67 per cent and in housing category at 8.45 per cent, both marginally higher than the previous month, as per the data.

A recent increase in government-mandated prices is now predicted to add Rs 15,000 crore to the government's costs, raising concerns over inflation remaining elevated over the coming months. The forecasts ranged from 4.60 percent to 6.00 percent. Indranil Pan, group economist of IDFC Bank, told news agency Reuters that rupee depreciation was likely to push up prices of inputs for manufacturers, which would be reflected in higher retail prices, and the central bank would be guided by inflationary concerns. Fed officials expect to raise short-term rates twice more this year. This is higher than the final figure of 4.87% for May.

India imports about 80 percent of its crude oil requirements.

The consumer price index (CPI) rose nearly three percent over the past year, the highest annual increase since February 2012, according to federal data.

Excluding food and fuel, however, the "core" index rose 0.2% for June, matching analysts' expectations on higher costs for medical care, cars and recreation.

For Americans, rising prices are problematic given that wage growth remains anemic, despite promises of corporate investment fueled by last year's federal income-tax cuts.

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