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.
