Inflation has breached comfort levels and assumed \u2018worrisome\u2019 proportions in India, Moody\u2019s Analytics on Tuesday said in a note on Asia\u2019s inflation worries driven by rising oil prices.<\/p>\n
Stressing that India\u2019s retail inflation has been breaching the Reserve Bank of India\u2019s (RBI\u2019s) 4% inflation target for the past eight months, the financial intelligence firm said India and Philippines are the two notable exceptions \u2014 in Asia \u2014 where inflation is beyond the comfort level.<\/p>\n
\u201cVolatile food prices and rising oil prices led India\u2019s CPI (consumer price inflation) to exceed the upper band of 6% several times in 2020, inhibiting the RBI\u2019s ability to keep accommodative monetary settings in place during the height of the pandemic. Higher fuel prices will keep upward pressure on headline CPI and keep the RBI from offering further rate cuts,\u201d said the firm, which operates independently of Moody\u2019s Investors Service, the credit rating agency. <\/p>\n
The firm said that India is expected to retain its current retail inflation targeting framework for monetary policy, with a target of 4% and a margin of 2% above and below that. The framework is due to be revised from April 1 this year. \u201cThe government is reportedly mulling small amendments, including increasing flexibility in exceptional times.\u201d<\/p>\n
Terming the rise in India\u2019s retail inflation worrisome, the firm said India\u2019s core CPI (excluding food, fuel and light prices) rose to 5.6% in February from 5.3% in January, even as food and beverage price inflation quickened to 4.3% from 2.7%. \u201cFood is a key driver of inflation, representing 46% of the CPI basket,\u201d Moody\u2019s Analytics said.<\/p>\n