Inflation Dynamics In India: Drivers, Trends, And Policy Responses In The Contemporary Economic Environment

Abstract

Inflation has emerged as one of the most critical macroeconomic challenges influencing India’s economic performance in recent years. This study examines the dynamics of inflation in India, focusing on its major drivers, evolving trends, and the effectiveness of policy responses in the contemporary economic environment. Using recent data from 2018 to 2025, the paper investigates how factors such as supply chain disruptions, global commodity price shocks, food price volatility, fiscal pressures, and demand-side fluctuations shape India’s inflation trajectory. The study also analyses the role of the Reserve Bank of India’s Flexible Inflation Targeting (FIT) framework and evaluates the impact of monetary tools including repo rate adjustments, liquidity management, and communication strategies. Further, it assesses complementary fiscal measures such as subsidies, welfare schemes, and taxation policies that influence price stability. The findings highlight that inflation in India is increasingly shaped by both domestic structural factors and external global influences. The study emphasizes the need for coordinated monetary–fiscal strategies and stronger supply-side reforms to achieve long-term price stability.