NO : WP-2025-001
AUTHOR : Roshin Paul P and Taniya Ghosh
TITLE : Insights from Indian households’ qualitative inflation expectations
ABSTRACT :
Using the Reserve Bank of India’s inflation expectations survey of households (IESH) covering the period 2008 to 2023, we analyze the qualitative inflation expectations (IE) of Indian households at the general and item-wise level. We determine whether they have any forward-looking properties and additionally study the pattern of uncertainties and disagreements associated with households’ IE during various economic episodes in India. We find that the households have different opinions on the IE of different items, and they are influenced by various macroeconomic shocks. Additionally, their three-months-ahead overall IE are formed mainly based on their IE on food products, followed by cost of services and non-food products, while their one-year-ahead IE are formed mainly based on the IE of non-food products, followed by cost of services and food products. Moreover, the quantified three-months-ahead IE and one-year-ahead IE when fitted into the hybrid version of the New Keynesian Phillips Curve were found to be statistically significant in predicting inflation. Further, the respondents’ demographic characteristics have an impact on their qualitative IE and the uncertainty that comes with it. Lastly, we discovered that the inflation shocks in either direction led to an increase in the disagreements on IE of households.
Keywords: Cross-Sectional Models; Disagreement; Inflation; Inflation expectations; Survey; Uncertainty
JEL Code: C21, C83, D84, E31
Weblink: http://www.igidr.ac.in/pdf/publication/WP-2025-001.pdf
