Event reports
The paper attempted to analyze a better way to measure and report inflation in India, while adding value to the existing literature by using innovative techniques and arriving at a meaningful conclusion. The paper attempted to characterize India’s inflation with the help of the Phillips Curve theory. It was mentioned that to estimate the open economy Phillips curve, three variables – inflation, the output gap and the real effective exchange rate are needed. However in the case of India, the incorrect measurement of all these variables causes difficulty in estimating the Phillips curve.
The paper used the empirical findings of Singh, B.K. et al (2011) and argued that overheating was the main cause of the current inflationary situation in the economy. Also the study found that the prime factors behind the cause of high inflation in India were adverse supply shocks and positive demand shocks and the threshold level of inflation in the case of India is 6 percent. It was highlighted that in recent periods, inflation in India has been well above the threshold level of inflation.