The Expectation Escalator
Ask Indian households what inflation is today, and they'll overestimate. Ask what it will be in a year, and they'll say even higher. This pattern has held for 68 out of 70 survey rounds since 2008.
7.8%
Current Perception (R82)
8.9%
3-Month Expectation
8.9%
1-Year Expectation
The three lines never converge
In 68 out of 70 rounds (97%), households expect 1-year-ahead inflation to be higher than current perception. The gap has averaged about 1-1.5 percentage points. This is a structural behavioral pattern, not a response to specific economic conditions.
Perceptions are consistently 3-5pp above actual CPI
Household inflation perception has swung from 5.2% to 12.7%. These numbers are consistently 3-5 percentage points above actual CPI - households feel inflation more acutely than official statistics suggest.
COVID pushed perception to 10.5%
The post-COVID inflation surge pushed current perception to 10.5%. Unlike the 2008-2013 high-inflation era where perceptions were consistently above 10%, the COVID spike was sharper but shorter.
Why it matters for RBI policy
The RBI watches these expectations closely because they can become self-fulfilling. If households expect 9% inflation, workers demand higher wages, businesses raise prices, and inflation actually rises. The persistent gap is why the RBI struggles to anchor expectations around its 4% target.