'Persistent inflation hurting India's sovereign ratings'

India's sovereign ratings are constrained by persistently high inflation that is weighing on an otherwise promising economic recovery, Moody's Investors Service said in a release on Thursday.

"Recurrent inflationary pressures ... keep domestic capital costs high, erode domestic purchasing power as well as savings and lower international competitiveness," the rating agency said.

Moody's also said the supply response to inflation has been weak and the government-directed food distribution system has made worse the food supply constraints.

Without a significant increase in food output, the risk from continued inflation could limit India's growth prospects, Moody's said.