Clocking an inflation rate of 9.5 per cent, India posted the sharpest rise in prices across emerging market (EM) economies in 2013. While this was a notch below the 10.2 per cent price rise registered in 2012, it is significantly higher than what was seen by other EM economies. But there was some good news too. According to the IMF, India’s inflation rate is expected to ease to 8 per cent in 2014. Indonesia and Brazil are the two other high inflation countries.

In contrast, Malaysia, China and Thailand have experienced a softer 2-3 per cent inflation rate in the last two years.

High inflation in India in 2013 was largely fuelled by rising food prices. On the other hand, a hike in the prices of subsidised goods by the Indonesian government was responsible for a 6.4 per cent rise in inflation in that country from 4 per cent in 2012. Gasoline prices were raised by 44 per cent and diesel by 22 per cent in June 2013, the first time in many years.

China, on the other hand, saw weak consumption and investment demand keep prices from rising sharply.

This has given the People’s Bank of China leeway to pursue an expansionary monetary policy to support growth.

The situation in Brazil is trickier. The Brazilian central bank was forced to successively hike the benchmark Selic rate from an all-time low of 7.25 per cent in March 2013 to 11 per cent in April 2014 to check inflation. The rate had to be hiked despite a weak 2.3 per cent growth last year.

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