India and China’s inflation trends are significantly different, with India striving to recover after Covid, according to Moody’s Analytics.
Moody’s Analytics stated in a report on Friday that the outlook for retail inflation in Asia’s two largest economies, India and China, is uncertain and currently significantly different.
According to the report, a struggling China is experiencing inflation levels much lower than those seen in India, where there is no indication of a slowdown in price pressures.
In contrast, China’s inflationary pressures have remained subdued due to a persistent demand shortfall and a decline in pork prices, whereas India finds itself at the opposite end of the spectrum.
Chinese consumer price inflation decreased to 0.1 percent annually in March from 0.7 percent in February. Meanwhile, retail inflation in India is currently around 5 percent, nearing the upper end of the Reserve Bank of India’s tolerance band of 2-6 percent.
According to a report by Moody’s Analytics, the Indian economy experienced some of the most significant output losses globally as a result of the Covid-19 pandemic and is only now starting to recover.
“Examining the GDP in comparison to its pre-COVID-19 trajectory reveals that India and Southeast Asia have encountered some of the most significant output declines globally, with their recovery only in its initial stages,” stated the report authored by Stefan Angrick and Jeemin Bang.
The report also indicates that India’s output remains 4 percent below its projected level if not for the impact of the Covid-19 pandemic and subsequent disruptions such as supply chain issues and overseas military conflicts.
The rating firm now anticipates the Indian economy to expand by 6.1 percent in 2024, a decrease from the 7.7 percent projected last year.
According to Moody’s Analytics, the Asia-Pacific region is expected to outperform other parts of the world. While the global economy is projected to grow at 2.5 percent this year, the APAC region may see growth at 3.8 percent, as per the report.
Despite challenges such as insufficient domestic demand and numerous structural imbalances like an oversized property sector, the report highlights that China’s policy response has been lacklustre.
“China’s policymakers are hesitant to allocate substantial fiscal support or significantly reduce interest rates,” the report stated.
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