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Measurement of Inflation in India: Issues and Associated Challenges for the Conduct of Monetary Policy

Author

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  • Nadhanael G V
  • Sitikantha Pattanaik

Abstract

In India, there is a large divergence between CPI and WPI inflation trends in the past, wide dispersion in inflation across commodity groups within WPI, and significant volatility in headline WPI inflation under the influence of supply shocks, the statistical limitations of prices data have received increasing attention in the policy debates. This paper presents the key issues in the current context, while also explaining how policy analyses relevant for the conduct of monetary policy could yield ambiguous results if inflation data used in such analyses have serious limitations. [Staff Studies].

Suggested Citation

  • Nadhanael G V & Sitikantha Pattanaik, 2010. "Measurement of Inflation in India: Issues and Associated Challenges for the Conduct of Monetary Policy," Working Papers id:2822, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:2822
    Note: Institutional Papers
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    References listed on IDEAS

    as
    1. Rudrani Bhattacharya, 2008. "Early Warnings of Inflation in India," Working Papers id:1682, eSocialSciences.
    2. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
    3. Stephen G. Cecchetti & Junhan Kim, 2004. "Inflation Targeting, Price-Path Targeting, and Output Variability," NBER Chapters, in: The Inflation-Targeting Debate, National Bureau of Economic Research, Inc.
    4. Robert J Hill, 2004. "Inflation Measurement for Central Bankers," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Simon Guttmann (ed.),The Future of Inflation Targeting, Reserve Bank of Australia.
    5. W. Erwin Diewert, 1998. "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 47-58, Winter.
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    Cited by:

    1. Patnaik, Ila & Shah, Ajay & Veronese, Giovanni, 2011. "How to measure inflation in India?," Working Papers 11/83, National Institute of Public Finance and Policy.
    2. Paramita Mukherjee & Dipankor Coondoo, 2019. "The Indian Inflation 2006–2016: An Econometric Investigation," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 20(1), pages 46-69, March.

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    More about this item

    Keywords

    supply shocks; volatality; central bank; reserve bank; RBI; statistical issues; Exchange Rate; REER; financial; economic; Inflation Measurement; Monetary policy; India; CPT; WPI; commodity; prices; data; Inflation;
    All these keywords.

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