## What is Responsible for India’s Sharp Disinflation?

_IMF Working Papers, August 8, 2016_

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## Bibliographic details
- Authors: Sajjid Chinoy, Pankaj Kumar, Prachi Mishra
- Published: August 8, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475523935.001

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### Methodology
- Analysis using an augmented Phillips Curve approach.

### Key findings
- The dramatic decline in India’s inflation over the last two years is analyzed and decomposed.
- The direct role of lower oil prices in India’s disinflation was relatively modest given the limited pass-through into domestic prices.
- Inflation in India is a highly persistent process, reflecting:
  - very adaptive expectations, and
  - the backward looking nature of wage and support price-setting.
- A moderation of expectations, both backward and forward, and a rationalization of Minimum Support Prices (MSPs) explain the bulk of the disinflation over the last two years.

### Policy implications / recommendations (as implied by findings)
- Addressing adaptive expectations could be central to sustaining lower inflation.
- Rationalization of Minimum Support Prices (MSPs) is an important factor in managing inflation dynamics.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/what-is-responsible-for-indias-sharp-disinflation-44175_