International Journal of Research in Finance and Marketing
Year : 2014, Volume : 4, Issue : 1
First page : ( 34) Last page : ( 47)
Online ISSN : 2231-5985.

Inflation and economic growth of India

Kaur Amandeep

Assistant Professor of Economics, Department of Economics, Guru Nanak Khalsa College, Yamuna Nagar, Haryana, India

Online published on 5 June, 2014.

Abstract

Most of the people from the general public to professional economists use the term “inflation” pretty casually. It is increasingly applied to any rise in prices, and even Economists use it interchangeably with the rise in the cost of living. Inflation is measured based on the consumption of basket of goods and ability to hedge asset of the people across the income level. This paper seeks to examine the relationship between inflation and GDP growth in India. The empirical evidence is obtained from the reports of the Reserve Bank of India.

The result shows that there is a long run negative relationship between inflation and GDP growth in India. Inflation is damaging than helpful to growth. (There results have important policy implications.) This paper is an attempt to put the Indian Growth and Inflation story of the last 60 years in perspective. In this paper the known determinants of growth and inflation were examined in detail. In this paper particular emphasis is given to the developments over the last 28 years, a period during which the GDP growth rate has averaged 6.2% per annum, a full 2.6% points above the average growth during the previous 30 years.

Growth during the first period was much slower than the global average, while parts of the second period growth (2003 to 2007/08) have the hallmarks of a miracle.

Top