Inflation and Growth in India-A Debate

The inflation versus growth question has occupied centre stage in the Indian policy debate for the last couple of years. There is a consensus that high inflation and high economic growth cannot co-exist for a long period. The debate continues about the sustainability of growth with moderate inflation (five to eight percent) in the long run. Annual growth rate of GDP and Inflation during period 2008–2013 shows an inverse relationship. During this period inflation rate rises but GDP growth rate falls. In the wake of the financial crisis, the RBI lowered its interest rates to tackle the global meltdown keeping in line with a worldwide decline in interest rates. Barring this phase from 2008 to 2010, the RBI has maintained a tight monetary grip on the economy, and this is true especially of the post-2010 period. This was a time when India was reeling under price rises. This paper raised a robust issue arising in the current economic scenario. This is a recent debate on inflation growth dilemma facing by Indian economy. This is a cause of concern for RBI as well as Government.