GDP deflator inflation projection

With price stability being the key objective of monetary policy, measurement of inflation assumes paramount importance. Inflation can be measured with several price statistics, viz. indices based on prices of commodities sold in wholesale markets or prices paid by consumers at the retail level or using a broader index like the gross domestic product (GDP) deflator, which is based on all the goods and services produced in the economy. Inflation measured using the GDP deflator is also important as nominal GDP is used to assess the fiscal and external balance in the economy. The study aims to provide clarity on the relationship between inflation based on the GDP deflator with other indices. Furthermore, an attempt has been made to forecast deflator inflation based on a disaggregated study of its constituents.