The growing threat of stagflation for the Indian economy and persistence of retail inflation above 6 percent may lead to rise in interest rates, a domestic ratings agency said on Wednesday.
The uncertain outlook on inflation in the short term has already led the Monetary Policy Committee (MPC) to hold the interest rates in August and has also diminished the likelihood of any further rate cut in the near term, Acute Ratings and Research said.
The risks of stagflation have increased significantly for the Indian economy which may slow down the effectiveness of monetary and fiscal measures adopted by the central bank and government.
Stagflation implies a painful phase of high inflation but low or negative growth which can aggravate the challenges faced by the Indian policymakers, it said in a report.
Persistence of retail inflation beyond 6 pc may lead to rise in interest rates: Report
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