Food, headline, and core inflation: Horizon-dependent transmission in India

Food price shocks are often treated as transitory and largely irrelevant for underlying inflation. In emerging economies, where food has a large weight, such shocks may be more persistent and broader in their effects. Using monthly CPI data for India from 2012 to 2025 this paper examines how inflation transmits across horizons from food to headline and core inflation, and whether food shocks affect core inflation directly or through headline inflation. Three findings emerge. First, food inflation leads headline inflation at medium- to long-run horizons, indicating that food price shocks are not purely short-lived. Second, headline inflation leads core inflation at longer horizons, consistent with second-round effects. Third, food and core inflation co-move at longer horizons. However, the predictive role of food inflation weakens for the exclusion-based core measure once controls are included, but persists for some statistical core measures. These results point to a sequential, horizon-dependent transmission mechanism and highlight the policy relevance of persistent food shocks.