India's inflation "uncomfortably high": Moody's Analytics

India’s inflation was “above comfort levels”, according to a report from Moody’s Analytics on Tuesday, even as inflation remained subdued in most Asian economies.

Higher fuel prices are expected to keep an upward pressure on the headline consumer price index (CPI), leaving no further space for rate cuts from the Reserve Bank of India (RBI), the report said.

India’s inflation was worrisome as retail inflation jumped up to 5% in February against 4.1% in January, posing an additional challenge to policymakers, the report titled, ‘Macro Roundup: Is Inflation the Next Worry in Asia?’ said.


“Volatile food prices and rising oil prices led Indiaʼs CPI to exceed the upper band of 6% several times in 2020, inhibiting the RBIʼs ability to keep accommodative monetary settings in place during the height of the pandemic,” the intelligence arm of the global rating agency said.


Brent crude had climbed 26% this year and was sitting around $64 per barrel compared to around $30 per barrel in March 2020, when the Covid-19 crisis was near its peak, the report said.


The RBI is expected to maintain its policy rates during the first bi-monthly monetary policy review of FY22 slated for April 7.

While the central bank’s current inflation targeting band of 2-6% was set to expire on Wednesday, Moody’s Analytics said it expects the RBI to retain the same band beyond March 31.

The report highlighted that retail inflation held above the RBI’s 4% target for eight months during the last year, with food being a key driver of inflation, representing 46% of the CPI basket.

“The government is reportedly mulling small amendments including increasing flexibility in exceptional times,” it added.

The Philippines was the only other Asian country facing heightened concerns on account of inflation, the report said, with Hong Kong, Singapore and Malaysia recording a modest increase in inflation levels while China saw inflation fall for the third consecutive month.