New Delhi, Sep 24 - Increasing inflation will be a problem for India's policymakers in the near future, says the research arm of global rating agency Moody's.

'India has distanced itself from the risk of deflation, which is defined as an extended period of price contraction,' said Sherman Chan, economist with Moody's economy.com Thursday.

'Both external and domestic economic developments are generating inflationary pressures in India. As the global economy gradually recovers, commodity prices are rising, adding to production costs, which will be passed down the production chain and eventually borne by customers,' Chan said.

Meanwhile, she said, the drought has also contributed to price growth in recent weeks.