India inflation Rate and GDP Growth Rate 2023

 

 

 

 

Impact of Inflation on Economic Variables of Indian Economy

Co-relation between Inflation and GDP Growth Rate:

Year	Inflation (%)	GDP Growth Rate
2019	3.73%	3.87%
2020	6.62%	-5.83%
2021	5.13%	9.05%
2022	6.70%	7.24%
2023	5.49%	7.2%
Co-relation	-0.303597716

 

Analysis:

Above data indicates that the co-relation between inflation and GDP growth rate during 2019 to 2023 is -0.3036. It suggests that there is negative relationship between inflation and GDP growth rate. As inflation increase, GDP growth rate decreases, but the relationship is not very strong.

 

Lagged Effects:

Inflation might affect the GDP growth rate in long term. We can measure thr long term effect of inflation on GDP growth rate by comparing inflation of one year with GDP growth rate of next year. Then we have to calculate co-relations.

 

Year	Inflation (%)	Year	GDP Growth Rate
2018	3.94%	2019	3.87%
2019	3.73%	2020	-5.83%
2020	6.62%	2021	9.05%
2021	5.13%	2022	7.24%
2022	6.70%	2023	7.2%
Co-relation	0.7789

 

Analysis:

The co-relation between the previous year’s inflation and subsequent year’s GDP growth rate is 0.7789. It suggest that there is a strong positive Co-relation between inflation in one year tends to be followed by stronger GDP growth rate in subsequent years.

Reason behind strong positive lagged co-relation:

COVID-19 Pandemic (2019-2021)

The most important global events that affects the GDP growth rate of every country in the world is COVID-19. In 2020, inflation rate was 6.62%, but GDP growth rate was -5.83%. The reason is COVID-19 Global Pandemic Event. This pandemic leads to global economic contraction in 2020. As economy recovered in 2021, there was a strong recovery in GDP growth of 2021. This Is the lagged recovery, where inflation pressure in 2020 corrospond to GDP growth rate in 2021.

 

 

References:

India inflation rate 1960-2024. (n.d.). MacroTrends. https://www.macrotrends.net/global-metrics/countries/IND/india/inflation-rate-cpi

India, F. (2024, August 28). Inflation Rate in India 2024: A closer look at economic trends. Forbes India. https://www.google.com/amp/s/www.forbesindia.com/amp/article/explainers/inflation-rate-india/85983/1

India, F. (2024b, September 2). GDP of India: Current and historical growth rate, India’s rank in the world. Forbes India. https://www.google.com/amp/s/www.forbesindia.com/amp/article/explainers/gdp-india/85337/1