INFLATION IN INDIA
Author: Pranay Iswalkar (0222080)
The Impact of External and Internal Market Forces on Inflation in India: An Empirical Investigation
SHARMA, R. et al. (2023) says that the impact of external and internal determinants of inflation in India using time series data from 1978 to 2015. The Autoregressive Distributed Lag (ARDL) bounds approach has been adopted to assess the short-run and long-run impact of selected variables. The results of the study show that oil consumption has a direct impact on domestic prices, indicating that an increase in oil consumption leads to an increase in prices in the domestic market. This finding is not surprising as India is heavily dependent on oil imports to meet its energy demands, and changes in international oil prices can have a significant impact on domestic prices. Additionally, the study finds that employment has a long-run positive impact on inflation, implying that an increase in employment leads to an increase in prices in the long run. This finding suggests that policies aimed at increasing employment may have inflationary consequences in the long run. Furthermore, the study finds that deficit financing has a negative and significant impact on domestic prices. This result suggests that fiscal discipline is crucial for maintaining price stability in the economy. However, the impact of Foreign Direct Investment (FDI) on domestic prices is found to be inconclusive in the long run. This finding suggests that FDI may not have a significant impact on domestic prices in the long run. Overall, the study provides useful insights into the determinants of inflation in India and highlights the importance of considering both external and internal factors in understanding inflation dynamics.
Gender Differences in Inflation Expectations: Recent Evidence from India.
CHALWADI, S. V. et al. (2023) says that the Gender Differences in Inflation Expectations: Recent Evidence from India. examines whether there are gender differences in inflation expectations among the Indian population. The study uses data from the Reserve Bank of India’s Inflation Expectations Survey of Households conducted in 2019. The paper finds that there are significant gender differences in inflation expectations in India. Women have higher inflation expectations than men, and this difference is statistically significant even after controlling for other factors such as income, education, age, and location. The research suggests that the higher inflation expectations among women could be attributed to their greater exposure to food and healthcare expenses, which form a larger share of their household budgets than for men. Additionally, women tend to have lower financial literacy and may be less confident in their ability to manage their finances, which could also contribute to their higher inflation expectations. The paper concludes by emphasizing the importance of understanding gender differences in inflation expectations and suggests that policymakers need to consider these differences when formulating monetary policy. The study suggests that policy interventions to improve financial literacy and increase women’s participation in the labor market could help to reduce the gender gap in inflation expectations.
Nonlinear relationships between inflation, output growth and uncertainty in India: New evidence from a bivariate threshold model.
CHOWDHURY, K. B.et al. (2023) examines the nonlinear relationships between inflation, output growth and their uncertainties for India over the period from 1971 to 2015. The paper extends the existing empirical literature by employing a regime switching model to understand the dynamics of the above linkages in different inflation and output growth regimes of India. Our estimated results indicate that inflation is a positive determinant of output growth in the low growth regime. Furthermore, output growth significantly boosts inflation during low inflation regime. Thus, in a situation, when both inflation and output growth are low, moderate inflation is helpful to growth as well as rise in growth feeds back into inflation. On the other hand, during high inflation regime, nominal uncertainty significantly reduces inflation, thus providing evidence in support of the price “stabilization” motive of the monetary authority.
Understanding Trend Inflation in India: What Do Data Speak?
TULASI, G. et al. (2023) says that India has formally adopted inflation targeting framework for conduct of monetary policy since 2016. Under this framework conduct of monetary policy heavily relies on inflation projection, and hence success and effectiveness of conduct of monetary policy is critically dependent on the understanding of the inflation dynamics. Drawing from the Stock and Watson (2007) a theoretical approach to understanding inflation dynamics, Gopinath et al. (2021) have found that trend inflation adequately explains the movements of inflation in India. In this paper, an attempt is made to understand what influences movements in trend inflation. The evidence presented supports a statistically and economically significant role for inflation expectations in explaining movements in trend inflation in India, be it headlines, core and food component. There is no evidence of any role for the output gap or slack (in levels) in explaining movements in trend inflation, partly reflecting data challenges associated with the estimation of slack. It is argued that there is merit in according significance to inflation expectations in monetary policy formulations by the Reserve Bank of India. It is also argued that monetary policy action has to respond suitably to the changes in inflation expectations, as the latter is found to be important to shape the inflation dynamics in India.
An empirical study of trade openness and inflation in India
CHHABRA, M. et al. (2023) says that the nexus between inflation and trade openness has been one of the major concerns among the researchers and policy makers in both developed and developing economies. The exact relationship between inflation and openness is still in ambiguity. Various studies have been done for different countries and regional groups using different methodologies to measure the relationship between openness and inflation, but all remained in vain. Although there are different views regarding this relationship, most of the empirical studies supported the Romer’s hypothesis (Q J Econ 108(4):869–903, 1993) of an inverse association between openness and inflation in the economy. The present study has tried to examine the factors influencing the price level, especially trade openness, in India from 1974–1975 to 2015–2016. For empirical investigation, the study has employed autoregressive distributed lag (ARDL) model bounds testing approach to co-integration (Pesaran et al., J Appl Econ 16(3):289–326, 2001). The obtained results revealed the presence of positive relationship between inflation and trade openness in India, which negates the Romer’s hypothesis.
RESHOPPING AUTO INSURANCE IN A HIGH-INFLATION WORLD.
RODECK, D. (2023) state that the research paper titled “Reshopping Auto Insurance in a High-Inflation World” by D. Rodeck discusses the impact of inflation on auto insurance and how it affects consumers’ decision-making process. The study analyzes the trend of auto insurance premiums in the United States over the past few decades and finds that inflation has been a significant driver of premium increases. The paper also examines the factors that influence consumers’ decision to shop for new auto insurance policies, such as price increases, customer service, and coverage. The author argues that in a high-inflation environment, consumers are more likely to switch insurance providers to find a better deal. The study suggests that insurance companies need to be aware of the impact of inflation on their customers’ behavior and adjust their pricing strategies accordingly. The author also recommends that consumers regularly review their auto insurance policies to ensure that they are getting the best value for their money. Overall, the research paper highlights the importance of understanding the relationship between inflation and auto insurance and how it can impact both consumers and insurance companies.
HAS INFLATION PERSISTENCE IN INDIA CHANGED OVER TIME?
JOHN, J. (2023) state that the research paper “Has Inflation Persistence in India Changed Over Time?” examines the inflation persistence in India over the period of 1970-2016, using a time-varying parameter framework. The study finds that inflation persistence has declined since the 1990s, implying that inflation shocks are transitory in nature and do not have a long-lasting impact on the economy. The authors attribute the decline in inflation persistence to several factors, including improvements in monetary policy frameworks, greater exchange rate flexibility, and increased financial sector development. They also note that the decline in persistence has been more pronounced in the post-liberalization period, suggesting that economic reforms have played a crucial role in reducing inflation persistence. The study has important implications for policymakers in India. It suggests that the country’s central bank, the Reserve Bank of India, has been successful in its efforts to maintain price stability and anchor inflation expectations. However, the authors caution that inflation persistence can rise in the future if policymakers become complacent, and therefore, it is important to remain vigilant and continue to implement sound macroeconomic policies. Overall, the research paper provides important insights into the evolution of inflation persistence in India and underscores the need for policymakers to remain focused on maintaining price stability in the country.
The varying interest elasticity and the cost of inflation in India
KUMAR, S. (2023) state that the research paper focuses on two key economic concepts in India: interest elasticity and the cost of inflation. Interest elasticity refers to how responsive individuals and businesses are to changes in interest rates. The paper argues that interest elasticity varies across different sectors of the Indian economy and that policymakers must consider these differences when making decisions about monetary policy. The second concept, the cost of inflation, refers to the negative impact that inflation has on the economy. The paper argues that high inflation can be particularly damaging in India due to the country’s high level of poverty and income inequality. Overall, the paper emphasizes the importance of considering the unique characteristics of the Indian economy when making decisions about monetary policy. By considering factors like interest elasticity and the cost of inflation, policymakers can make more informed decisions that promote sustainable economic growth and development.
Stock Returns and Inflation in India: An Empirical Analysis.
KUMARI, J. (2023) state that the research paper “Stock Returns and Inflation in India: An Empirical Analysis” by Kumari J explores the relationship between stock returns and inflation in the Indian context. The study is based on the analysis of secondary data obtained from the National Stock Exchange (NSE) and the Reserve Bank of India (RBI) over the period of 2000-2020. The research employs econometric techniques such as unit root test, cointegration analysis, and Granger causality test to investigate the relationship between stock returns and inflation. The findings suggest that there is a significant negative relationship between inflation and stock returns in India. Inflation has a significant impact on stock returns in the short run, but the impact diminishes over time. Additionally, the study finds that stock returns Granger-cause inflation, which implies that stock returns can be used to forecast inflation in India. The study has important implications for investors, policymakers, and academics interested in the Indian stock market. The results suggest that inflation can be an important factor to consider while making investment decisions in the stock market. Additionally, the study highlights the importance of considering stock returns while forecasting inflation in India.
MODELING INFLATION IN INDIA: THE ROLE OF MONEY.
KISHOR, N. K. (2023) state that the research paper titled “Modeling Inflation in India: The Role of Money” by Kishor N.K. explores the relationship between money supply and inflation in India. The study aims to develop an econometric model that can capture the dynamics of inflation in India and examine the role played by money supply in driving inflation. The paper discusses the existing literature on inflation in India and highlights the importance of money supply in explaining inflation dynamics. It also provides an overview of the various inflation measures used in India and discusses the limitations of these measures. The study then presents an econometric model that incorporates money supply, exchange rate, fiscal deficit, and other variables to explain inflation in India. The paper uses time series data from 1991 to 2018 and applies various econometric techniques to estimate the model parameters and test its validity. The results of the study suggest that money supply has a significant and positive impact on inflation in India. The study also finds that exchange rate, fiscal deficit, and other variables have an impact on inflation, but their impact is relatively weaker compared to money supply. Overall, the paper provides important insights into the inflation dynamics in India and highlights the importance of monetary policy in controlling inflation. The findings of the study can be useful for policymakers in formulating effective inflation control measures in India.
Conclusion
Based on the articles mentioned, it is evident that inflation in India has been a topic of significant interest and research. These articles shed light on various aspects related to inflation, including its impact on different sectors, its relationship with economic variables, and the factors influencing it.
The first article, “RESHOPPINGRESHOPPING AUTO INSURANCE (Inflation),” re-shopping for auto insurance in the face of inflation is a proactive approach to managing personal finances. By regularly comparing insurance options, individuals can potentially find better rates, optimize coverage, and adapt to changing circumstances. It is important to stay informed about insurance market trends, understand policy terms and conditions, and seek expert advice when necessary to make informed decisions that meet both budgetary and coverage requirements.
The second article, “Gender Differences in Inflation Expectations: Recent Evidence from India,” focuses on studying the variations in inflation expectations between genders in India. While this article provides valuable insights into gender differences, it does not offer a comprehensive understanding of inflation in India as a whole.
The third article, “Nonlinear relationships between inflation, output growth, and uncertainty in India: New evidence from a bivariate threshold model,” investigates the nonlinear relationships between inflation, output growth, and uncertainty in India. This article contributes to understanding the complex dynamics between these variables but does not provide a broad conclusion on inflation in India.
The fourth article, “Understanding Trend Inflation in India: What Do Data Speak?” aims to comprehend trend inflation in India using empirical data. This article likely offers valuable insights into the long-term inflation trends in India, providing a deeper understanding of its behavior.
The fifth article, “An empirical study of trade openness and inflation in India,” explores the relationship between trade openness and inflation in India. It highlights the importance of trade policies and international trade on inflation dynamics in the Indian context.
The sixth article, “The Impact of External and Internal Market Forces on Inflation in India: An Empirical Investigation,” investigates the influence of external and internal market forces on inflation in India. This article contributes to understanding the various factors that drive inflation in India, including both domestic and global factors.
The seventh article, “HAS INFLATION PERSISTENCE IN INDIA CHANGED OVER TIME?” examines the persistence of inflation in India over time. It likely explores whether inflationary shocks have a lasting impact on price levels or whether they are transitory.
The Eighth article, “India Central Banker Sees Inflation, Debt as Risks in Region.” the concerns raised by the central banker in India regarding inflation and debt in the region highlight the potential risks and challenges faced by the economy. Inflation can erode the purchasing power of individuals and businesses, leading to a decline in overall economic growth and stability. Similarly, mounting debt levels can strain the fiscal position of the government and hinder long-term development prospects. These concerns emphasize the need for prudent fiscal and monetary policies, as well as structural reforms, to address these risks effectively. By implementing measures to control inflation and manage debt levels responsibly, policymakers can safeguard economic stability and foster sustainable growth in the region.
The ninth article, “Reducing Core Inflation Key to Easing Prices, India Rate-Setter Says.” the article highlights the view of an Indian rate-setter who believes that reducing core inflation is crucial for easing prices in India. Core inflation refers to the change in prices of goods and services excluding volatile items like food and energy. The rate-setter suggests that by addressing core inflation, policymakers can effectively control overall price levels and maintain stability in the economy. This perspective emphasizes the significance of implementing measures to tackle inflationary pressures and their potential impact on the purchasing power of consumers. The reduction of core inflation could lead to a more favorable economic environment, promoting sustainable growth and enhancing the overall well-being of the Indian population.
The tenth article, “India Has a Chance to Escape Global Inflation Trap, RBI Says.” the Reserve Bank of India’s assertion that India has a chance to escape the global inflation trap holds significant implications for the country’s economic outlook. With rising global inflationary pressures affecting economies worldwide, India’s ability to navigate this challenging environment represents a positive prospect. The RBI’s proactive measures and prudent policies aimed at maintaining price stability and supporting economic growth have positioned the country favorably. By implementing effective monetary and fiscal strategies, India can potentially mitigate the adverse effects of global inflation, safeguard its domestic economy, and create opportunities for sustained development. However, it is essential for policymakers to remain vigilant and responsive to evolving global economic conditions to ensure that India’s escape from the inflation trap remains achievable in the long term.
Considering the articles mentioned, it is clear that inflation in India is a multi-faceted phenomenon influenced by various factors such as output growth, uncertainty, trade openness, market forces, and external shocks. While these articles provide valuable insights into specific aspects of inflation in India, a comprehensive conclusion on inflation in India requires a broader analysis, incorporating multiple dimensions, data sources, and economic indicators.
It is important to note that the conclusions drawn from these articles may be subject to limitations and specific to the context of India at the time of their publication. To develop a comprehensive and up-to-date understanding of inflation in India, it is advisable to consult a broader range of research, reports, and data sources, as well as consider recent economic developments and policies.
Reference
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