Strategic Economic Framework for Balanced Inflation and Employment: Achieving Inclusive Growth in Urban and Rural India
Year: 2025
Type: article
Abstract: The primary objective of this paper is to discuss the complex relationship between inflation and unemployment in India with the aim of fostering sustainable growth and inclusive development. The study establishes relationships between the Consumer Price Index (CPI) and Unemployment Level in the Urban and Rural markets and draws conclusions about their occurrences by use of econometric models such as Vector Autoregressive (VAR) and Phillips Curve estimation model. Unlike most of the previous research, this work focuses on the relationship of inflation and unemployment by excluding the negative correlation as a given and investigates the effects of the other CPI components, especially the impact of separating the CPI components into Core and Non-Core CPI. The results suggest that Non-core CPI, including volatile items like food and energy prices, has an important bearing on unemployment, thereby undermining the traditional Phillips curve hypothesis in the Indian context. This suggests that the source of this employment instability includes elements due to fluctuations in Non-core CPI, which signifies that the facile generalization that inflation and unemployment exhibit a tradeoff should be avoided. The paper contributes to the literature by providing empirical evidence on the differing contribution of various CPI categories, preventing more targeted policy interventions. It however offers strategies which facilitate the harmonization of inflation control and employment creation, realization of inclusive growth and economic stability. The empirical revelations of this investigation underscore the imperative for a meticulously calibrated macroeconomic policy framework, one that acknowledges the idiosyncratic complexities inherent in India's economic paradigm.
Authors: Mr. Mohit Kumar, Saranga Gogoi, Hemangi Dhanke
Institution: Gokhale Institute of Politics and Economics
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W6893214882
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