Inflation-growth dynamics make policy making tough in India: Fitch

Year-to-date inflation averaged 5.2 per cent which is slightly below Fitch Solution's full-year forecast of 5.5 per cent for 2021

Fitch Solutions on Thursday has cautioned that policymaking could become slightly more challenging in the months ahead in India due to higher inflationary pressures, stronger growth, and still-wide fiscal deficits.

Inflation, growth and fiscal deficit make life slightly more difficult for policymakers, resulting in possible policy trade-offs, Fitch Solutions Country Risk and Industry Research said in its outlook for India. 

Given still-strong growth and rising inflationary pressures, the market is pricing in 30-40 basis point hikes by December, which poses upside risks to Fitch Solutions forecast of four per cent in repo rate by end-2021, it said.

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