Macroeconomic Determinants of Consumer Price Inflation in India: A Study of Recent Trends from 2017 to 2024

Abstract

The paper investigates the correlation of consumer price index with labour force participation and economic growth in India between 2017 to 2024. The analysis involves using secondary data that is sourced from the Ministry of Labour and Employment, the World Bank, the Ministry of Education and Macro trends to explore the effect of the rural and urban labour force participation rates between males and females, their enrolment in secondary schooling, total and planned spending on education and the yearly increase in the GDP on consumer price movements. Since the consumer price index data is non-negative and skewed and the time-series sample used is rather small, Poisson regression is the model used as the major econometric tool. The findings show that the result is high heterogeneity of labour market segments. Male labour force participation in the rural areas has a positive and significant relationship with the consumer price index and a negative significant relationship with female labour force participation. The variables of urban labour force participation are statistically insignificant and there are weaker or less predictable relationships with the price movements. The increase in the gross domestic product is observed to significantly affect the consumer price index negatively, which implies a higher rate of economic growth could alleviate the inflation pressure. The results reveal the significance of the demographic and sectoral differences in the study of the dynamics of inflation and offer policy-related details on labour participation and growth in the determination of price stability.