Abstract
The economies of developing countries are more affected by high inflation rate which disrupts the consumption, investment and production activities as well as their economic growth and in turn brings macroeconomic instability. This study investigates the impact of oil price, exchange rate, gross fiscal deficit and financial development on the inflation rate in India. The multiple regression model has been employed to analyse the secondary data (1980 to 2020) collected from the web portal of the World Bank and Reserve Bank of India. The result shows that the impact of the exchange rate fluctuation is considerably more realised in this study when compared to other independent factors. So import reduction and maintaining adequate foreign exchange reserves can bring stability in the exchange rate in India. Moreover, policymakers may concentrate on minimising crude oil consumption and promoting the use of renewable energy to protect the domestic economy from changes in oil price fluctuation in the global market. In addition to these suitable monetary as well as fiscal policies are inevitable to reduce the inflationary pressure in Indian economy.
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