India's consumer price index rose 4.81 percent on the year in June, picking up from an increase of 4.31 percent in May and above the consensus forecast of 4.60 percent. Inflation had fallen in each of the three previous months but despite this increase it remains within the Reserve Bank of India's target range of 2.0 percent to 6.0 percent after persisting around 7.0 percent for several months in mid-2022. The index advanced 1.01 percent on the month, after increasing 0.56 percent previously.

Food and beverage prices, which account for more than half the weight of the CPI index, were the major factor driving headline inflation higher in June. These prices rose 4.63 percent on the year after increasing 3.29 percent previously. Fuel and light charges, around 8 percent of the index, rose 3.92 percent on the year after increasing 4.64 percent previously. Inflation in urban areas picked up from 4.33 percent in May to 4.96 percent in June, while inflation in rural areas increased from 4.23 percent to 4.72 percent.

The RBI left policy rates on hold for the second meeting in a row at their most recent meeting held last month, after increasing them by a cumulative 250 basis points since May 2022. Officials noted at that meeting that risks to the inflation outlook were evenly balanced, and the increase in headline inflation reported today suggests officials will remain vigilant about inflation risks in upcoming policy meetings.

Consumer prices are expected to accelerate to 4.60 percent on the year in June versus 4.25 percent in May which compared with expectations for 4.40 percent.

The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Within the overall CPI basket, food (47 percent) has easily the largest weight of any of the major components and a separate consumer foods price index is also released. Monthly and annual changes in the CPI provide widely used measures of inflation and the latter is the policy target of the Reserve Bank of India (RBI).

CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting and for monitoring price stability, and as deflators in the national accounts. CPI is also used for indexing dearness allowance to employees for increase in prices. CPI is therefore considered as one of the most important economic indicators.

CPI numbers presently compiled and released at national level for India reflect the fluctuations in retail prices pertaining to specific segments of population in the country -- industrial workers, agricultural labourers and rural labourers. These indexes do not encompass all the segments of the population in the country and as such do not reflect true picture of the price behavior in the country. To overcome the above, the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation has started compiling new series of CPI for the entire urban population or CPI (Urban) and CPI for the entire rural population or CPI (Rural), which reflect the changes in the price levels of various goods and services consumed by the urban and rural population.