Stagflation concerns are overdone

There has been growing talk of “stagflation” in India following the release of December’s CPI data this week, which showed that headline inflation jumped to a five-year high. But we think these concerns are overdone. After all, the rise in headline inflation has been driven primarily by a surge in food prices, which should eventually reverse. And while we think core inflation will rise this year, that will largely be because of a strengthening in domestic demand.