What lowered inflation in India: monetary policy or commodity prices?
Pulapre Balakrishnan1,2, M Parameswaran3
1Ashoka University, Sonipat, Haryana 131029 India.
Abstract:
India has seen lower inflation by historical standards for the past 6 years. This has been attributed to the adoption of inflation targeting by the central bank, the Reserve Bank of India in 2016. In particular, it has been asserted that the lower inflation reflects the anchoring of expectations. We evaluate these claims. An econometric investigation indicates that there is no basis to the claim that inflation has been lowered due to the anchoring of expectations. On the other hand, we are able to account for the trajectory of inflation in India after 2016 in terms of an alternative explanation of inflation, namely the structuralist.
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