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

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Inflation and Relative Prices in 2006-10: Some Analytical and Policy Issues

An intriguing phenomenon in the Indian economy in the recent past has been the movement of inflation - in wholesale and consumer prices - between 2006 and 2010. This was a period - covering the pre- and postcrisis years - during which gdp growth was, first, very high and stable, only to be followed by sharp deceleration and then by a quick recovery. This paper sets out to analyse the movement of inflation over these years and the factors underlying the shifts. The policy dilemmas for the government and the central bank are discussed, as also what conventional theory suggests could be the causes and solutions. It concludes with a discussion of the likely challenges in the future.

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Inflation and Relative Prices in India 2006-10: Some Analytical and Policy Issues

Mihir Rakshit

An intriguing phenomenon in the Indian economy in the recent past has been the movement of inflation – in wholesale and consumer prices – between 2006 and 2010. This was a period – covering the pre- and postcrisis years – during which GDP growth was, first, very high and stable, only to be followed by sharp deceleration and then by a quick recovery. This paper sets out to analyse the movement of inflation over these years and the factors underlying the shifts. The policy dilemmas for the government and the central bank are discussed, as also what conventional theory suggests could be the causes and solutions. It concludes with a discussion of the likely challenges in the future.

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