This study investigates the long-run and short-run determinants of inflation in India using the Autoregressive Distributed Lag (ARDL) approach with quarterly data from 2012Q1 to 2024Q4. The analysis examines the effects of the repo rate, reverse repo rate, gross value added, and gross fiscal deficit on inflation. The ARDL bounds test confirms the existence of a stable long-run cointegrating relationship among the variables. The results reveal that the repo rate, gross value added, and fiscal deficit significantly influence inflation in the long run, while short-run dynamics indicate delayed effects of monetary policy and fiscal adjustments. Diagnostic and stability tests confirm the robustness of the estimated model. The findings underscore the importance of coordinated monetary and fiscal policies, credible inflation targeting, and sustained productivity growth to achieve long-term price stability in India.
Inflation, Monetary Policy, Fiscal Deficit, Repo Rate, Gross Value Added, ARDL Error Correction Model.