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    ISAS Working Papers

    Long-term studies on trends and issues in South Asia

    128 : Inflation in India: An Empirical Analysis

    Pratima Singh

    10 May 2011

    High inflation in India has become a major issue with both academ ics and policy makers . It is one of the big gest hindrances to growth and a major policy challenge for incumbent governments . This paper analyses trends in infl ation over the past five years, particularly food inflation, and examines the demand and supply side factors behind surging food prices . It argues that demand for several food items in India exceeds their current suppl ies , and leads to high p rices. It further contends that this demand - supply imbalance is attributable to structu ral inefficiencies , including distribution of food products. Pointing out that monetary policy responses are unlikely to prove effective in reducing food prices, the paper emphasises on the importance of increasing agricultural productivity and reforming retail trade policies for long - term results.