This study investigates the asymmetric relationship between inflation and economic growth in India from 1990 to 2021 using the Nonlinear Autoregressive Distributed Lag (NARDL) approach. By decomposing inflation into positive and negative shocks, the analysis reveals that disinflationary episodes significantly enhance long-run economic growth with a 1% decrease in inflation raising GDP growth by approximately 3.4 percentage points, while inflationary shocks exhibit negligible effects. In the short run, positive inflation shocks have a lagged stimulative effect, whereas money supply expansions negatively affect growth contemporaneously and with a lag. The bounds test confirms stable long-run cointegration, and diagnostic tests validate the model’s robustness. These findings challenge conventional symmetric assumptions of inflation–growth dynamics and highlight the moderating role of monetary factors in India’s growth trajectory. Policy implications suggest that mild deflation, when driven by productivity and efficiency gains, need not be viewed as harmful. Instead, adopting a flexible inflation-targeting framework, investing in supply-side improvements, and ensuring adequate liquidity are essential to balance price stability with sustainable growth.
Amar Nath Das (Sat,) studied this question.