Older population, inflation expectations, and COVID-19: evidence from India’s household expectation survey

The current research attempts to understand the inflation expectations of the older population in India using the Inflation Expectations Survey of Households (IESH) conducted by the Reserve Bank of India (RBI). In the Indian context, this is the first paper to analyze the inflation expectations of the older population and check whether expectations have changed post-pandemic (COVID-19). The study uses unit-level data from December 2017 to November 2022, which contains qualitative and quantitative responses of household expectations for the current, 3 months ahead, and 1 year ahead. We use two-way frequency tables and linear regression to analyze the quantitative responses. We find that among different age groups, older populations expect higher inflation irrespective of time horizons, and this has increased further, especially post-pandemic. Our results also indicate significant gender, occupation, and locational differences in inflation expectations among the older population. For qualitative responses, in addition to the two-way frequency table, we employ multinomial logistic (mlogit) regression. We find that only for the category “price increase similar to the current rate,” the older population’s 3-month-ahead expectation is higher than those of other age groups. Thus, qualitative and quantitative findings are complementary in this case. We put greater emphasis on quantitative responses because they offer an objective measure that minimizes biases and variability. As highlighted in the literature, the inflation expectations from household surveys are not rational. They are biased upwards, but RBI may still use the expectations to conduct monetary policy and understand future savings. Thus, our findings highlight the critical role of the Central Bank in managing inflation expectations.