Congrats, your rupee is now worth 10% less

Inflation continued to remain above 10% in June, led by high food inflation, latest government numbers show.

Overall, on an all-India basis, consumer prices were up 10.02% in June, compared to prices in June 2011.

Double-digit consumer price inflation is bad news for people with fixed income, such as those on salaries and pensions. Even as prices increase at the rate of 10% a year, their salaries often fail to keep up, resulting in a loss of purchasing power and quality of life every year.

Consumer inflation is often targeted to be kept in the low single digits (2-3%), but the high inflow of money, including unaccounted-for or ‘black’ money, increases the supply of cash in the system, pushing up prices. Government deficits and the resulting printing of extra currency also increases money-supply and adds to the inflation.

Inflation was similarly high (10.36%) in May also.

In June, the highest price increases were noted in the food category. Vegetable prices were up about 27% in one year, hitting the poor, who often have fixed income, hard.

Similarly, prices of oils and fats were up 17% (see chart below), followed by milk, egg, fish and meat prices.

Another area of concern is fuels, including petrol, LPG etc.. Fuel prices were up 10.3% in June.

Fruit prices, as measured by the CPI, are up about 38% from their 2010 levels (2 years).

Geographically speaking, eastern and north eastern states like Assam, Meghalaya, West Bengal and Odisha continued to see the highest prices. Prices here were higher by 20% or more compared to the 2010-levels.

There was a slight technical decline in inflation rate for urban areas.

“Decline in the inflation rate for the urban areas in June 2012 as compared to May 2012 is attributed to the higher base of the housing group index for June 2011 as compared to May 2011. Housing group includes items such as house rent, water charges and repair charges. For compilation of house rent index, rent data are collected from the sample of rented dwellings (distributed over six months) once in six months. House rent data for six months period are therefore required for computation of house rent index.

Housing group index for June 2011 included the rent index compiled using the rent data for the period January 2011 to June 2011, which was the first six months period after the base year of January 2010 to December 2010,” the government release explained.