NO : WP-2026-015
AUTHOR : Roshin Paul P and Taniya Ghosh
TITLE : Inflation Awareness, Expectation Formation, and Monetary Policy Communication: Evidence from Indian Firms
ABSTRACT :
Drawing on an original survey of 485 firms spanning four major metropolitan areas — Delhi, Mumbai, Chennai, and Kolkata — we examine firms’ awareness of official inflation statistics and estimate the causal impact of monetary policy communications on their expectations. We find that approximately 87% of respondents lack a clear understanding of current CPI inflation, while 70% are unaware of the RBI’s inflation-targeting framework. A randomized control trial reveals that providing firms with simple information — either the RBI’s 4% inflation target or the prevailing CPI inflation rate — significantly lowers both one-year-ahead and five-year-ahead inflation expectations, with modest spillovers to expected unit costs and wages. Moreover, small firms, female respondents, and those with lower income and education levels — who tend to hold the most elevated inflation expectations — exhibit the strongest updating in response to information treatments, highlighting the potential of targeted, accessible communication strategies to anchor expectations among informationally disadvantaged firms and individuals, and thereby strengthen policy credibility and price stability.
Keywords: Cross Sectional Survey; Communication; Expectations; Inflation; Inflation Targeting; Monetary Policy
JEL Code: C83, D84, E31, E52
Weblink: http://www.igidr.ac.in/pdf/publication/WP-2026-015.pdf
