• Khurram Khowaja

This paper studies the question of the presence of threshold effects in the relationship between inflation rate, based on consumer price index (CPI) for industrial workers (CPI-IW) and rural labourers (CPI-RL), and real gross domestic product at factor cost (GDPFC) growth in India using Sarel methodology. The study is based on empirical analysis and uses data for the period of Q1:2000-01 to Q4:2017-18 in order to capture the most recent picture of the inflation growth nexus. Empirical results suggest that there exists statistically significant relation between inflation and growth. At 3.5 per cent level of inflation there is positive impact of inflation on growth, while at 6.5 per cent level of inflation there is a negative impact of inflation on growth. Controlling inflation is a necessary condition for promoting economic growth. The policy implication derived from this study is that it is desirable to keep an inflation rate below the threshold level in India, as it may help a sustainable growth. In order to maintain price stability while keeping in mind the objective of growth, Reserve Bank of India (RBI) needs to keep 3.5 per cent inflation as the target.

Inflation; Economic growth; Threshold inflation; Non-Linear relationship

"A Non-Linear Relationship Between Inflation and Growth in India", International Journal of Emerging Technologies and Innovative Research (www.jetir.org), ISSN:2349-5162, Vol.6, Issue 1, page no.1997-2014, January-2019, Available :http://www.jetir.org/papers/JETIR1901D86.pdf

"A Non-Linear Relationship Between Inflation and Growth in India", International Journal of Emerging Technologies and Innovative Research (www.jetir.org | UGC and issn Approved), ISSN:2349-5162, Vol.6, Issue 1, page no. pp1997-2014, January-2019, Available at : http://www.jetir.org/papers/JETIR1901D86.pdf