India:Higher commodity prices push inflation up

Both consumer and wholesale prices had a common theme in February. Theheadline prints ticked up. And in details, higher commodity prices, particularly forfood and fuel, pushed up non-core (or input price) inflation, even as core inflationedged lower. There are risks that the rise in input prices could eventually feed intohigher output prices. Given these pressures, and RBI’s change in stance fromaccommodative to neutral, we expect rates to be on hold over the foreseeablefuture. Meanwhile, India’s macro environment is much stronger now thanks to lowinflation, narrower deficits, high FX reserves and a positive outlook for reforms.