India's inflation higher than Russia and China, projected to ease

India’s inflation is higher than Brazil, Russia and China and some developed markets including the United States of America.

Government data released on Wednesday shows India’s consumer inflation rose to 4.81 per cent in June, after hitting a 25-month low of 4.25 per cent in May. South Africa’s inflation was at 6.3 per cent, the highest in the BRICS bloc that has Brazil, Russia, India and China as its other members.

Price rise in the United States, which released its inflation figures for June on Wednesday, was at 3 per cent: the lowest in over two years. Inflation in the United Kingdom was the highest among developed-market countries at 8.7 per cent. (chart 1)

The Reserve Bank of India’s monetary policy committee meeting last month kept interest rates unchanged and lowered its inflation forecast to 5.1 per cent from 5.2 per cent for 2023-24. India’s rate hikes, since the pandemic, have been lower than many advanced and emerging market economies.

The fall in global inflation rates in 2023 and 2024 is likely to be a result of declining commodity prices and weaker demand, as per the International Monetary Fund’s (IMF) January 2023 World Economic Outlook.

“About 84 percent of countries are expected to have lower headline (consumer price index) inflation in 2023 than in 2022. Global inflation is set to fall from 8.8 percent in 2022 (annual average) to 6.6 percent in 2023 and 4.3 percent in 2024,” said the report.

In developing economies, annual inflation is expected to decline from 9.9 per cent in 2022 to 8.1 per cent in 2023 and 5.5 per cent in 2024. India’s inflation is likely to decline to 4.9 per cent in 2023 from 6.67 per cent in 2022 (chart 2).

Shaktikanta Das, governor of the Reserve Bank of India, said in June  that despite a "slow and protracted disinflation process" India is likely to remain one of the fastest-growing economies in 2023.

Inflation in advanced economies is expected to remain above target levels, according to IMF. Average inflation is projected to decline to 4.6 per cent in 2023 from 7.3 per cent in 2022. Despite the declining trend relative to recent history, the IMF report expected the average inflation rates across many economies to remain above pre-pandemic levels in 2024.