‘RBI’s inflation target a step in right direction’
The RBI’s inflation targeting regime has worked well. Given this record, radical changes such as broadening its mandate or abandoning the target in favour of a more discretionary regime would be risky and counterproductive, says a new research paper
New Delhi: The Reserve Bank of India’s (RBI’s) inflation targeting regime has worked well and need not be abandoned in favour of a more discretionary regime that could be risky and counterproductive, a new research paper said.
The paper titled ‘Inflation Targeting In India: A Further Assessment’ said the weight of food-price inflation in the CPI inflation basket should be reduced to better reflect the circumstances of Indian households.
“The RBI’s inflation targeting regime has worked well. Given this record, radical changes such as broadening its mandate or abandoning the target in favour of a more discretionary regime would be risky and counterproductive,” it said.
The paper is authored by economists Barry Eichengreen (University of California, Berkeley) and Poonam Gupta (NCAER).