Food inflation credit negative: Moody's
New Delhi (PTI): Global rating agency Moody's said India's high food inflation is credit negative for the country as it hurts government finances and...
New Delhi (PTI): Global rating agency Moody's said India's high food inflation is credit negative for the country as it hurts government finances and curtails the ability of the RBI to deal with monetary issues.A "Sustained food inflation is credit negative because it exacerbates India's macroeconomic challenges of slowing growth, high inflation and large fiscal and current account deficits," Moody's Investors Service said in credit outlook report. While Fitch and Standard and Poor's have downgraded their outlook on India to "negative" from "stable", Moody's Investors Service has assigned a "stable" outlook.A The Wholesale Price Index for February showed that food prices increased by 11.4 per cent year-on-year, raising overall inflation for the month to 6.8 per cent, despite a deceleration in core inflation to 3.8 per cent. Moody's said India's current pace of food inflation is faster than the global average. "Moreover, although food inflation is not desirable anywhere, it has particularly credit negative implications for India because of its economic structure and policy framework," it added.A Food inflation, it said, "hurts consumption, government finances, the balance of payments and monetary policy flexibility". "Because the Indian government subsidises food for a large portion of the population, increases in food prices inflate government expenditure. And the budget deficit, which is already high relative to comparable emerging markets," Moody's' said. As per the credit ratings agency, food demand is unlikely to fall, and food supply is difficult to raise. Moody's said that given growing incomes among India's 1.2 billion people, demand for food will continue to grow over the next several decades. FDI cap to ease further: FM New Delhi: Continuing the reform push, the government is considering further liberalising foreign investment cap in various sectors, Finance Minister P Chidambaram said. "Many caps can be removed or certainly relaxed. Some of these caps are completely irrelevant in terms of the changed situation," he told a private news channel. The government had in September last year liberalised Foreign Direct Investment (FDI) norms for various sectors, including retail and aviation. "We need to clear some of the cobwebs accumulated in India and go out and woo specific business houses," he said.
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