India is the only emerging economy under the ‘BRICS' grouping where inflation has shown some signs of easing, albeit by a small margin.

In comparison, inflationary pressure has surged this year in Brazil, South Africa, and rather sharply in China and Russia.

Despite the decline in headline inflation in India, the latest estimates continue to rule at higher levels in comparison to all the other ‘BRICS' nations, a grouping acronym that refers to Brazil, Russia, India, China and South Africa.

It needs to be noted that India uses the wholesale price index data for the headline inflation estimate, while for all the other BRICS countries , the consumer price indices are used.

Traditionally, India has been a moderate inflation country, with the historical average long-term inflation rate around 7.5 per cent, according to RBI estimates. But the spike in inflation during the last couple of years has emerged as a big area of concern for policy makers and the Central bank alike, with the RBI having already hiked the key policy rates 11 times since March 2010 to curb runaway inflation.

The International Monetary Fund estimates that consumer price inflation in developing Asia, which almost doubled from 3.1 per cent in 2009 to 6.0 per cent in 2010, will stay around last year's levels in 2011. With increasing global integration, international commodity prices are having an increasingly significant influence on domestic prices in India and the other emerging market economies. It is expected that global commodity prices will peak in 2011.

According to the Chairman of Goldman Sachs Asset Management, Mr Jim O'Neill, demand in the so-called BRICS economies is now more important to the world economy than the US and Europe. Since much of the inflation that China, India and other developing economies have recently seen stems from food and energy prices, policymakers in the developed world are prompted to recalibrate the consequences of any fresh monetary or other stimulus.

In India, an additional worry is that a sustained level of high inflation is leading to increased inflation expectations, causing prices to rise further.

This is corroborated by the latest RBI survey of households for the April-June quarter, which shows that the inflation expectations for one year ahead have moved up to 12.9 per cent from the 12.7 per cent recorded in the previous survey.

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