Taking cognisance of households’ inflation expectations in India

The paper studies characteristics of inflation expectations in developed and emerging economies. It finds that properties of expectations in India share similarities to those in other economies. Acknowledging the inherent bias in expectations in India, this paper proceeds to find one of the many possible use cases for capturing households' expectations. It attempts to find a relationship between households' expectations and their future savings pattern. The analysis indicates households' reduced preference for bank term deposits when they expect rising inflation. Hence, households' inflation expectations despite bearing upward bias should be tracked to assess households' behavioural decisions, such as future savings