ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Rudrani BhattacharyaSubscribe to Rudrani Bhattacharya

Micro-level Price Setting Behaviour in India

In the contemporary literature of macroeconomics, the mainstream frameworks for policy evaluation have recognised the significance of price rigidities, emerging from the micro-level pricing behaviour of firms, to explain the short- and medium-run effects of monetary policy interventions. The stickiness in price adjustment is evaluated in the context of the Indian economy by using the Consumer Price Index for Industrial Workers data. The findings suggest that the monthly frequency of price changes is greater for the food group compared to the non-food group, and evidences are also found of exogenous versus menu cost-driven pricing behaviour in India.

Early Warnings of Inflation in India

In India, year-on-year percentage changes of price indexes are widely used as the measure of inflation. In terms of monthly data, each observation of a one-year change in inflation is the sum of 12 one-month changes. This suggests that better information about inflationary pressures can be obtained using point-on-point monthly changes. This requires seasonal adjustment. We apply standard seasonal adjustment procedures in order to obtain a point-on-point seasonally adjusted monthly time-series of inflation in India. In three interesting high inflation episodes - 1994-95, 2007 and 2008 - we find that this data yields a faster and better understanding of inflationary pressures.
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