Abstract
The present paper attempts to explore the nature, trends and patterns of inflation in India during 1980-2016. The selected time period has been trifurcated purposively into three-time spans namely, pre-reform period (1980-90), after reform period (1991-2000) and subsequent period (2001-16). The endeavour of the paper is to examine the dynamics of inflation over the three-time spans from 1980-2016 in the Indian economy. It has been found that the inflation, based on WPI and CPI, is continuously rising since 1980. Up to 1995, the trend in CPI and WPI were same and there was no significant difference between them. However, after 1995, CPI has recorded larger growth as compared to WPI. Such trend has also continued in the subsequent period. The study reveals that this trend may be attributed to change in the composition of WPI and CPI since weights of primary articles have declined in WPI whereas such weights have registered a considerable increase in the categories of manufacturing, fuel and power. The shift in weights overtime provides us with an indicator of the changing production and use pattern of the commodities in the Indian set up. Further, the weights of food items have reduced overtime in case of CPI and such weights have been increased in respect of clothing, housing and fuel. The changes witnessed in weights of CPI are indicators of a growing economy. This study further contributes in the available literature by comparing the patterns of Inflation in Pre and Post-reform Period.
Highlights
Inflation is one of the most important macroeconomic variables which needs to be tackled prudently
In the post reform period the rate of increase in Wholesale Price Index (WPI) is greater as compared to Consumer Price Index (CPI) and the third phase was very turbulent and severe in terms of the inflation, as it registered a big jump in WPI to 182.03 in the year 2014-15 and in CPI to 273.56 in the year 2015-16
Such gap was more dramatic during this period. This is a question of major concern. Why such divergence has occurred? Conventionally the main reason for the CPI inflation being higher than WPI inflation is that food articles had a higher weight (48.3 per cent) in CPI than in WPI (24.3 per cent)
Summary
Inflation is one of the most important macroeconomic variables which needs to be tackled prudently. The weights in the manufactured products are Inflationary concerned, the weight of traditional items has declined and it has increased in Trends in India other items which are emerging important in the growth process. The growth pattern experienced by the Indian economy during the first decade of this century must have compelled the authorities’ changes weights of CPI overtime.
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