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How to measure inflation in India?

Author

Listed:
  • Patnaik, Ila

    (National Institute of Public Finance and Policy)

  • Shah, Ajay

    (National Institute of Public Finance and Policy)

  • Veronese, Giovanni

    (Bank of Italy)

Abstract

What is the best inflation measure in India? What inflation measure is most relevant for monetary policy making in India? Questions of timeliness, weights in the price index, accuracy of food price measurement, and inclusion of services prices are relevant to the choice of measure. We show that under present conditions of measurement, the Consumer Price Index for Industrial Workers (CPI-IW) is preferable to either the Wholesale Price Index or the GDP deflator.

Suggested Citation

  • Patnaik, Ila & Shah, Ajay & Veronese, Giovanni, 2011. "How to measure inflation in India?," Working Papers 11/83, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:11/83
    Note: Working Paper 83, 2011
    as

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    References listed on IDEAS

    as
    1. Catão, Luis A.V. & Chang, Roberto, 2015. "World food prices and monetary policy," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 69-88.
    2. Anand, Rahul & Prasad, Eswar, 2010. "Optimal Price Indices for Targeting Inflation under Incomplete Markets," IZA Discussion Papers 5137, Institute of Labor Economics (IZA).
    3. N. Gregory Mankiw & Ricardo Reis, 2007. "Sticky Information in General Equilibrium," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 603-613, 04-05.
    4. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
    5. Nadhanael G V & Sitikantha Pattanaik, 2010. "Measurement of Inflation in India: Issues and Associated Challenges for the Conduct of Monetary Policy," Working Papers id:2822, eSocialSciences.
    6. Aoki, Kosuke, 2001. "Optimal monetary policy responses to relative-price changes," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 55-80, August.
    7. Stefano Eusepi & Bart Hobijn & Andrea Tambalotti, 2011. "CONDI: A Cost-of-Nominal-Distortions Index," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 53-91, July.
    8. Pierpaolo Benigno & Michael Woodford, 2005. "Inflation Stabilization And Welfare: The Case Of A Distorted Steady State," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1185-1236, December.
    9. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1415-1464.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The great Indian GDP measurement controversy
      by Ajay Shah in Ajay Shah's blog on 2016-09-10 07:49:00
    2. Slamming the accelerator while hitting the brakes
      by Ajay Shah in Ajay Shah's blog on 2011-05-19 13:24:00
    3. Kicking the wheels of the new CPI
      by Ajay Shah in Ajay Shah's blog on 2011-04-28 15:29:00
    4. Kicking the Wheels of the New CPI
      by Ajay Shah in Citizen Economists on 2011-04-29 19:35:45
    5. Slamming the Accelerator While Hitting the Brakes
      by Ajay Shah in Citizen Economists on 2011-05-19 19:15:19

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    Cited by:

    1. Yanamandra, Venkataramana, 2015. "Exchange rate changes and inflation in India: What is the extent of exchange rate pass-through to imports?," Economic Analysis and Policy, Elsevier, vol. 47(C), pages 57-68.

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    More about this item

    Keywords

    Monetary policy ; Inflation measure ; Statistical system;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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