Emerging markets such as India have always run higher inflation rates than developed economies such as the US and countries of Western Europe.
But for the first time in the past 30 years, the US reported a higher consumer price inflation (CPI) rate than India in five consecutive months.
The US reported a CPI rate of 7.5 per cent in January 2022 against 6.01 per cent in India and analysts expect the trend to continue for at least a few months more (see the adjoining charts).
Before this, inflation in the US was higher than in India on only four occasions -- November 1999, December 1999, May 2004, and June 2017. In the past 30 years, inflation in India has been higher than in the US by, on average, 4.75 per cent.
A sharp rise in the retail inflation rate in the US has raised fears of a quicker increase in interest rates in the world’s biggest economy, which could hurt capital inflows into India and other emerging markets.
While lower inflation is generally believed to be a positive indicator for an economy, many experts say India’s relatively low CPI is not beneficent but hints at a lack of demand in the economy.
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