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InflationSubscribe to Inflation

Tackling Food Inflation

Vol. 58, Issue No. 44, 04 Nov, 2023
Ashok Gulati, Raya Das, Sanchit Gupta, Manish Kumar Prasad

Retail inflation, measured by the year-on-year consumer price index, reached 6.83% in August 2023, higher than the Reserve Bank of India’s upper tolerance limit of 6%. This surge was driven by soaring food prices. The government has implemented a series of measures, including an export ban on non-basmati white rice, export ban and stocking limits on wheat, a 20% export duty on parboiled rice, a minimum export price of $1,200 per tonne on basmati rice, etc, to contain food inflation. However, these abrupt and stringent market-depressing measures are impacting farmers’ income adversely. A more rational and dependable trade policy that balances the interests of producers and consumers while containing food inflation is advocated.

Sharp Slump in Net Financial Savings of Households

Vol. 58, Issue No. 39, 30 Sep, 2023

The decline in savings will now make domestic investments more dependent on external funding.

Consumer Prices

Vol. 58, Issue No. 35, 02 Sep, 2023

A continued surge in food prices can derail both economic and political prospects.

Role and Impact of Inflation Targeting Regime on Households’ Inflation Expectation

Vol. 58, Issue No. 35, 02 Sep, 2023
Rahul Ranjan, Hrushikesh Mallick

The inflation targeting regime has almost no impact on households’ inflation expectation formation. The article finds a very high correlation between the three–month ahead households’ IE and current inflation perception. It argues that the IE majorly depends on households’ realisation of current inflation, providing very less space for other factors, like regime shift to IT. It further questions the fundamental need of awareness regarding the IT regime for it to affect the IE formation among households.

All Hawks but Not the Same

Vol. 58, Issue No. 23, 10 Jun, 2023
Dhruv Verma

The widespread attribution of inflation to supply-side factors permitted policymakers to escape criticism from their overly expansionary past. This article demonstrates that the inflated monetary base drove up the prices and contextually analyses a variety of policies to remedy this.

Monetary Policy in the Midst of Cost-push Inflation

Vol. 58, Issue No. 22, 03 Jun, 2023
Zico Dasgupta, Indranil Chowdhury

The Reserve Bank of India adopted inflation-targeting monetary policy based on the New Keynesian 3-equation model. How realistic are the assumptions, and how effective have monetary policy instruments been in controlling the inflation rate? Given India’s structural specificities, what are the implications of cost-push inflation for policy rate and output gap? This paper addresses these questions by identifying alternative theoretical possibilities within a simple 3-equation model and locating the Indian specificity by estimating the Phillips curve and monetary policy rule equation. The analysis points towards the constraints of monetary policy in India due to presence of a flat Phillips curve and indicates the possibility of adverse effect on output gap due to presence of Taylor’s rule.

Monetary Growth, Financial Structure, and Inflation

Vol. 58, Issue No. 22, 03 Jun, 2023
C Rangarajan, Dilip Nachane, Partha Ray

It is argued that a key question of the operation of monetary policy is its decomposition into a price effect and an output effect. Specifically, the
association between the easing of global monetary and liquidity conditions on the one hand, and the significant spurt in inflation, on the other, in recent
times is probed to conclude that across the world, there seems to be an association. The issues of monetary stability, price stability and financial stability are also intimately interlinked.

Some Contemporary and Classical Issues of Money and Finance

Vol. 58, Issue No. 22, 03 Jun, 2023
Partha Ray

Post the pandemic, the world seems to be back on a high-inflation path, and many geographies in the advanced world have started witnessing inflation rates that were prevalent in the early 1970s.

Current Inflation in India

Vol. 58, Issue No. 17, 29 Apr, 2023
D M Nachane

Following the standard percepts for dealing with supply shocks, monetary policy continued to be easy for an extended period, while simultaneously huge fiscal stimuli were applied. Even when a more restrictive monetary stance was taken, the measures were not strong enough to restrain inflationary expectations. A soft monetary policy with a sizeable fiscal deficit can harden inflationary expectations and a perpetuation of a new higher normal for inflation.

Union Budget 2023–24

Vol. 58, Issue No. 12, 25 Mar, 2023
Ashima Goyal

Consolidation is necessary, but so is stimulus. The budget ably attempts both through gradual deficit reduction and better expenditure composition. But success also needs coordination with monetary policy and with states. Further, inflation-lowering supply-side action will enable countercyclical smoothing; stronger institutions and incentives can improve state capex and public service delivery.

Inflation Theory Comes Full Circle

Vol. 58, Issue No. 9, 04 Mar, 2023
Pulapre Balakrishnan, M Parameswaran

A public interchange among some leading macroeconomists suggests a change in the way inflation is perceived by the profession. It is increasingly being recognised that inflation can be the outcome of a conflict over income, reflected in the continuous attempt by the firms to raise prices and by the workers to raise wages in order to gain a larger share of it. At least some part of the inflation in India can be seen as a conflict over income shares and sketches a theory of inflation suited to its economy. Against this background, the effectiveness of inflation targeting is touched upon—the inflation-control strategy of the Reserve Bank of India—and the necessary steps to curb inflationary pressure in India are pointed out.

Heading towards a ‘W’-shaped Recovery?

Vol. 58, Issue No. 2, 14 Jan, 2023

A sustained economic recovery requires that the huge growth deficit in industry be reversed.

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