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The inflation data was released just a few days back and you may have heard a new jargon creeping into the lexicon of business media "Stagflation." So, what is stagflation? To put it simply, a sharp fall in growth accompanied by a very big spike in inflation is the textbook definition of stagflation.
CNBC-TV18 spoke to R Nagaraj, professor at IGIDR and Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership to understand whether India is headed for stagflation.
Nagraj said, "When you have low growth rate, it is usually expected that there is no pressure on demand and therefore, the prices are low and therefore the inflation is low. However, what we find is that while the growth has slowed down but inflation has suddenly gone up, so this is a classic definition of stagflation - inflation plus stagnation of output or decline in output."
Upadhyay said, "There is no uniform standard way to quantify stagflation. In the US, which is the most celebrated case for stagflationary episodes in the 1970s, the growth had actually contracted between 1973 and 1975 after growing 4.5-5 percent in the previous decade. We have not seen growth contracting in India, even if you say that growth has weakened sharply from close to 8 percent beginning of last year to 5 percent growth levels now."
