What does the sharp spike in US inflation mean for India?

The US CPI or retail inflation saw a sudden spike in the month of April 2021 to 4%. This is ironic at a time when India inflation is just about 4.29% and surely paves the way for monetary tightening in the US as well as possible rate hikes in the future. The spike in inflation in the US led to a sharp fall in the Dow and the NASDAQ on Wednesday.

The 90 bps spike in non-core inflation is the worst spike since April 1982 and largely a result of the massive stimulus of $2.3 trillion. It also means that the Fed could end up front-ending the 25 basis points rate hike. The rate of CPI inflation is already way above the maximum limit defined by the US Fed and is a basket case for a rate hike and could force the RBI to also follow suit to avoid any major capital outflows from India.