Spatial dynamics of inflation in India: an econometric analysis

The study examines whether inflation convergence across various states in India exists after the adoption of the Inflation Targeting (IT) using monthly data during 2011M01-2021M12. Compared to pre-IT, the number of states shows a rise in convergence, while the median half-life period declines during the IT period. Concerning convergence, we find multiple convergence in both pre-IT and IT periods. However, the number of states following the national trend is much greater in IT than in the pre-IT period despite COVID-19. The present results help policymakers envisage the possibility of augmenting uniform monetary policy with region-specific inflation management measures.