Retail inflation, as measured by the Consumer Price Index, exceeded the Reserve Bank of India’s 4% target in June for the first time in seventeen months, due to the war in West Asia. CPI inflation rose for the eighth straight month, reaching 4.4% in June, higher than the Bloomberg Economics Survey’s forecast of 4.2% and the highest since December 2024, when the figure was 5.2%.
CPI inflation crossed the 4% mark as the impact of the West Asian crisis on fuel prices was incorporated into the CPI data and food services (restaurants, cooked meals, etc.), and inflation, which had already captured the impact of the war, rose further. To be sure, overall inflation remains within the RBI’s tolerance band of 2% to 6%.
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Core inflation, which excludes food and fuel groups and is considered relatively immune to seasonal fluctuations, was 4.1% in June, up from 3.7% in May. Non-core inflation, which includes food and fuel groups, was 4.9%, up from 4.3% in May. Inflation in the food and beverage division, which has a 37% weight in the CPI basket, was 5.3%, up from 4.8% in May.
While higher food inflation has played a role in increasing overall inflation, this must be read with the fact that this is partly due to a negative base effect. While disaggregated data for the current series of the CPI (with 2024 as the base year) are only available from January 2026, the old series (with 2012 as the base year) recorded a contraction in food and beverage prices from June to December of 2025.
June’s CPI figures are the first to record the full extent of the rise in retail petrol and diesel prices. This is because the National Statistical Office (NSO) records the prices of petrol, diesel and CNG as of the 15th of the month to calculate the CPI; Most of the retail price increases in this type of fuel were implemented after May 15. Petrol price in four metros (Delhi, Mumbai, Chennai and Kolkata) as of June 15 was 6.9% to 7.8% higher than the previous year according to the Petroleum Ministry. Gasoline inflation reached 7.5% in the CPI data, up from 3.1% in May.
Likewise, the price of diesel in the same four cities was 7.7%-8.7% higher than a year earlier on June 15. Diesel inflation was 8.4% in the CPI data, up from 3.4% in May. Likewise, CNG inflation was 6.2% in June, up from 1.9% in May.
To be sure, gasoline, diesel, and CNG inflation only cover the personal transportation portion of transportation inflation, with weights of 2.5%, 0.1%, and nearly zero, which is not large enough to radically move CPI inflation.
Another group showing the impact of the West Asian crisis is food and beverage services. Inflation in this group – which has a weight of 3.3% in the CPI – rose from 2.7% and 2.9% in February and March to 4.2%, 5.8%, and 6.9% in April, May, and June. This may be due to food companies passing on higher LPG prices to consumers.
