For comparison purposes, I will briefly discuss the Chinese growth-inflation dynamics before coming back to a more detailed discussion of recent Indian patterns. Slide 2 depicts the growth rates achieved by the Chinese economy since its own liberalization of the late 1970s and the behaviour of its Consumer Price Index over the period.
Two episodes – one in the late 1980s and one in the mid-1990s – stand out. In both, a sharp rise in the inflation rate was followed by a decline in the growth rate. This was quite pronounced in the first episode and somewhat moderate, though unmistakable in the second.