Upside inflation risks are building in India. Damage to crops from bad weather has caused spikes in vegetable prices recently. And base effects aren’t helpful: food inflation will accelerate in year-on-year terms over the next few months even if prices are flat. Meanwhile, there is no sign yet that the Omicron variant is spreading at speed. But if it does, and further containment measures are implemented in response, that would probably push inflation up too. Whereas lockdowns were initially disinflationary in other countries, India’s two lockdowns both caused measures of core CPI inflation to jump by around 1%-pt.
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