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Inflation targeting may need to be refined, says Chief Economic Advisor

New Delhi: India’s inflation targeting band needs to be refined to reflect demand-side factors, and monetary policy should not be affected by supply-side factors, government officials said Monday. It was.
The current monetary policy framework signed by Prime Minister Narendra Modi’s government with the Reserve Bank of India (RBI) in 2015 will expire next month and will be adjusted at the time of approval over the next five years for greater flexibility. Supports economic growth.
Double-digit retail inflation during the UPA administration has gradually declined, helping Modi to win the second quarter in 2019.
Central bank tools need to improve monetary policy targets, as they primarily address demand-side factors and current inflation targets are affected by food prices, which rely primarily on supply-side measures. The ministry said on Monday.
“I don’t think it’s right to rely on one indicator,” he said.
Subramanian updates the 2011-12 base year and collects monthly consumer price data, suggesting that core inflation, which removes food and fuel prices, could be a better indicator to target. He added that household consumption items need to be reviewed in order to do so. It reflects changes in consumption patterns.
He said CPI inflation data also needs to capture online transactions.
Food prices, which account for almost half of the consumer price index, had a major impact on last year’s headline CPI inflation, he told Reuters in an interview.
Inflation rate in Asia’s third-largest economy returned to the Reserve Bank of India’s (RBI) inflation target of 2% to 6% last month after surpassing the central bank’s comfort range for eight consecutive months.

Inflation targeting may need to be refined, says Chief Economic Advisor

Source link Inflation targeting may need to be refined, says Chief Economic Advisor

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