Consumer Price Index

Contrary to several gloomy forecasts, the Indian banking sector has been surprisingly resilient in the face of the pandemic. This is because corporates, which account more than half the loans, are in better shape and banks are well-capitalised. This bodes well for loan growth and bank performance post the pandemic.

With core inflation still sticky, any significant dip in consumer prices is very unlikely.

Economic planning requires well preparedness to meet the challenge of a better growth rate.

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.

Price inflation in India as measured by the Wholesale Price Index and the Consumer Price Index has shown diverging trends. While WPI indicates a disinfl ationary situation for 16 months, CPI indicates inflation. Explaining the construction of the two indices, the trends of subgroups of both indices are presented. It is found that the different sample sizes and weightages of commodity groups of both indices and price interventions in the market explains, at least in part, this odd situation of infl ation along with disinfl ation.