Nomura: Inflation to surge in India

Nomura forecasts big increases in consumer and wholesale prices in India, Reuters reports:

“We believe that the economy is in the early stages of an inflation pick-up. With input cost pressures building and domestic demand in recovery mode, output prices should follow suit,” Sonal Varma, economist at Nomura, wrote…. Nomura revised its average inflation forecast for 2009/10 to 3 percent from 2 percent and for 20010/11 to 6.8 percent from 5.7 percent. It also revised its consumer price inflation estimate for 2009/10 to 10.8 percent for FY10 and 6.8 percent for FY11.

In a separate article, the Wall Street Journal noted that prices are rising not only in India, but also in South Korea and Indonesia:

While the West still worries about the ravages of deflation, emerging markets in Asia are beginning to contemplate what to do about the opposite problem: inflation.New figures released Thursday from Korea, Indonesia and India all show prices increasing, a sign that these economies have turned the corner and beaten deflationary pressures for now. It also confirms the likelihood that those countries will be among the first to raise interest rates as soon as this year.

After a larger-than-expected increase in wholesale prices Thursday, India’s finance minister, Pranab Mukherjee, warned “there is inflationary potentiality and inflation may go up further,” he said. “When it goes up it is a matter of concern….”

[T]he latest data confirm that Asian central bankers have to start thinking about applying the brakes to prevent economies from overheating. Interest rates in most countries are at record low levels and need to rise sharply to get back to levels associated with average growth rates.“Clearly the period of falling inflation is over for emerging markets,” says UBS economist Jonathan Anderson. “We are at the inflection point.”


2 Comments on “Nomura: Inflation to surge in India”

  1. […] is poised to shoot through the roof” By writejesse Lombard Street Research Ltd. joins Nomura in sounding the alarm over inflation in India.  Bloomberg News reports: India may need […]

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