New Delhi, Sep 24 (IANS) Increasing inflation will be a problem for India’s policymakers in the near future, says the research arm of global rating agency Moody’s.
“India has distanced itself from the risk of deflation, which is defined as an extended period of price contraction,” said Sherman Chan, economist with Moody’s economy.com Thursday.

“Both external and domestic economic developments are generating inflationary pressures in India. As the global economy gradually recovers, commodity prices are rising, adding to production costs, which will be passed down the production chain and eventually borne by customers,” Chan said.

Meanwhile, she said, the drought has also contributed to price growth in recent weeks.

“Although damages to farm output may not be as severe as anticipated thanks to some late rain, supply has still tightened,” Chan said.

“The fall in supply when demand is rising — partly as a result of the recent fiscal boost — is putting upward pressure on prices.”

The high base effect due to soaring fuel prices a year ago is fading, she noted, adding: “Price growth is expected to gather steam in coming months and become a policy concern again.”