Abstract

Inflation, as a pivotal economic indicator, influences the stability and growth trajectory of an economy. This study examines the evolving trends and patterns of headline inflation in India from 1971-72 to 2020-21. It employs Bai-Perron structural break analysis, the CUSUM test and the Chow test. The findings reveal six pivotal structural breaks in the inflation trajectory of the Indian economy, identified through the minimization of the Bayesian Information Criterion in model 6. The CUSUM graph indicates a lack of inflation stability, while the Chow test confirms the statistical significance of the identified breaks. The study attributes inflation fluctuations to a complex interaction of domestic and global factors, including food and fuel prices, fiscal and monetary policy actions and structural reforms.