Inflation up, growth down, is Indian economy headed for stagflation? Here's what it means according to experts

Inflation has been rising steadily for the past four months. We thought 7.3 percent was an ugly number for December and it would peak off maybe to 7.25 percent. However, in January, we got 7.6 percent which is outside the outside range that we got in our poll.

Food inflation was the big culprit, again 14 percent in December and we thought it was one-off because of a bad onion crop. But even after onion prices fell, we are still seeing a 13.63 percent food inflation in January. Adding to the onions were a whole host of protein commodities like milk, meat, eggs, fish and pulses. So, this is no longer a one crop failure inflation, it is deeper than that.

More importantly, the core inflation, which is non-food, non-fuel inflation, were at 4 percent in September 2019, then we brought it down and it has climbed again in January to 4.2 percent. So that means a wide range of personal services, transport and communication, a whole of host of them are rising.

When services inflation rises, it is important as services cannot be imported. Services are the inherent, durable, enduring inflation of a country and it is not good that it has climbed up by 70 basis points in just two months.

The other trouble is that rising inflation is coming in a syndrome of falling growth. The IIP after several negative numbers, we got a positive number in November, so one thought one had at least seen the last of contraction but in December you have again got a contraction.

Hence at a time of rising inflation, this fall in growth is throwing up a lot of difficult questions - is this stagflation? Is the spike in inflation a passing problem or an enduring problem? Can RBI persist with cheap money policies? What's the cure for falling growth along with rising inflation? To discuss this, CNBC-TV18's Latha Venkatesh spoke with Sudipto Mundle, emeritus professor at NIPFP; Soumya Kanti Ghosh, group chief economic advisor at State Bank of India and A Prasanna, chief economist at ICICI Securities.

Mundle says stagflation would be a too stronger word as in India growth rates of 4-5 percent look very low since we like to grow at something like 7-8 percent or 9 percent.

Rural inflation is running at significantly higher levels than urban inflation and last two to three months, some of the trends are looking worrisome, says Ghosh.

"So, I should not call it item-wise inflation, rather than it has spread to several commodities. But my point is that we need to look out for some months of data to arrive at a definitive conclusion," Prasanna said.