Inflation in China and India accelerated by more than economists forecast in March as rising commodity costs and inflows of capital threaten to overheat economies across Asia.

In China, consumer prices rose 5.4 percent from a year earlier, the fastest pace since 2008, a statistics bureau report showed yesterday. India’s wholesale prices jumped 8.98 percent as fuel costs rose, according to a commerce ministry statement.

The reports reinforce the International Monetary Fund’s warning this week that Asian officials must quickly tighten monetary and fiscal policies to reduce the risk that booms in regional economies will turn to busts. Four interest-rate increases in China since the start of 2010 and eight in India have failed to tame price pressures in the two fastest-growing major economies.

The Chinese and Indian data are “pointing to a common risk the major economies in the region face — overheating,” said Chang Jian, a Hong Kong-based economist with Barclays Capital who previously worked at the World Bank and Hong Kong Monetary Authority. “Policy makers should boost interest rates and allow their currency to gain faster to help subdue such a threat.”

South Korea, Malaysia and China should let their currencies climb faster as rising oil and commodity prices add to inflation pressures, she said.

Inflation Ceiling

Emerging-market stocks fell on concern that central banks will need to strengthen tightening measures. The MSCI Emerging Markets Index declined 0.2 percent as of 8:06 a.m. in New York yesterday.

China’s economy grew a more-than-estimated 9.7 percent in the first quarter from a year earlier and inflation exceeded the government’s 4 percent full-year target for a third month, yesterday’s report showed. The median forecasts in Bloomberg News surveys of economists were for growth of 9.4 percent and inflation of 5.2 percent.

The yuan touched 6.5290 per dollar yesterday, the strongest level since 1993, before closing at 6.5325. The currency has gained about 4.5 percent in the past year, Bloomberg data show.

The People’s Bank of China may imminently boost reserve requirements for lenders to drain cash from the economy, Credit Agricole CIB and Australia & New Zealand Banking Group said. The reserve ratio is 20 percent for the biggest banks and the one- year benchmark for borrowing costs is 6.31 percent after the most recent increase on April 5.

‘Aggressive’ Tightening

“There is little economic moderation despite aggressive monetary tightening,” said Liu Li-Gang, an ANZ economist in Hong Kong who formerly worked for the World Bank. “Inflation remains a top risk.’

Asian policy makers must “normalize” monetary and fiscal policies to avoid boom-bust cycles, the IMF said in a semiannual economic outlook this week.

Credit growth is accelerating in Hong Kong, India and Indonesia and remains “high” in the region’s biggest economy, China, the Washington-based lender said. Capital flows to Asia are likely to persist, the IMF said.

The fund said that “an abrupt slowdown of economic activity in China, perhaps following a credit and property boom and bust cycle, would adversely affect the whole region.”

China’s cabinet said this week that rising property prices in many cities and increasing inflation expectations are key concerns as the nation wrestles with the aftermath of a record 17.5 trillion yuan ($2.7 trillion) of lending over 2009 and 2010.

Overshooting Estimates

In India, inflation in the first three months of 2011 exceeded a central bank forecast. The increase in wholesale prices last month was more than all 28 estimates in a Bloomberg survey, where the median was 8.36 percent.

India’s bonds slumped, driving 11-year bonds yields to a two-month high, after the inflation report. The yield on the 8.08 percent note due August 2022, the most-traded government debt, rose four basis points to 8.24 percent at the 5 p.m. close in Mumbai, according to the central bank’s trading system.

Expansion in India’s $1.3 trillion economy has boosted consumer demand and spurred manufacturing, car sales and credit growth, stoking price risks. Central bank Governor Duvvuri Subbarao on March 17 increased the repurchase rate by a quarter point to 6.75 percent. The next monetary-policy announcement is due May 3.

“Inflation remains stubbornly high and above the level expected by policy makers,” Royal Bank of Canada said in a report after yesterday’s wholesale-price release. “The RBI has been among the most proactive of emerging-market central banks in normalizing policy rates over the last 12 months, but this persistence in price pressures suggests that policy makers will need to do more.”

Commodity Costs

The bank expects India to boost policy rates by half a percentage point this quarter, rather than the quarter-point increase it predicted previously.

India’s economy may expand as much as 9.25 percent in the year ending March 31, 2012, the finance ministry said in February. Commercial loans rose 21 percent from the previous year as of March 25, more than the 20 percent rate prescribed by the central bank.

In China, inflation was largely driven by food costs, which rose 12 percent in March from a year earlier. The leaders of Brazil, Russia, India, China and South Africa said at a meeting in China this week that volatile commodity prices pose a threat to the global economy, calling for more regulation.

Volatility “poses new risks for the ongoing recovery of the world economy,” the leaders said, according to a communiqué from their summit in the Chinese resort of Sanya. The BRICS, as the five are known, also called for greater vigilance over the impact of the flow of capital from developed economies into emerging markets.

In China, the central bank may increase the yuan’s flexibility to help counter inflation, Premier Wen Jiabao said this week. The Chinese currency is described by the U.S. as undervalued and a factor in global economic imbalances.