RBI yet to adopt inflation targeting, talks on with govt:Rajan

Posted By: Staff
Subscribe to GoodReturns

Mumbai, Mar 21 (PTI) Reserve Bank Governor Raghuram Rajan today said the central bank is yet to move to inflation targeting and is still in discussions with the government on the same. He also reiterated his preference for targeting retail price inflation. "We haven't moved into inflation targeting as yet…

That's something the Urjit Patel committee suggested, and its not something the RBI has accepted," Rajan said in his keynote address at the convocation of the central bank-run Indira Gandhi Institute for Development Research here. On adopting CPI inflation as the benchmark for fighting price rise, he said "we probably should focus on CPI rather than WPI. "What the RBI has said is that we are exploring the recommendations of the Urjit Patel report, and there are some aspects of it which have to be discussed with the government.

"We have to explore some of these aspects with the government, including the setting up of a monetary policy committee, including what, if any, the inflation target will be," he explained. On retail inflation, he said: "We need to bring CPI down. Whatever level it comes down to, but the path to bring it down to is 8 per cent by the end of this year, and 6 per cent at the end of the second year." The Patel report has called for moving away from the current wholesale price index based inflation to retail price based CPI inflation as the chief data point for RBI to set inflation expectations.

The report, released early January, has also called for inflation targeting, which is a process under which Parliament should set a target on inflation for the central bank. The report, penned by the deputy governor Patel has accordingly proposed a CPI target of 8 per cent by January next and 6 per cent by January 2016. CPI index for February came in at 8.1 per cent and WPI at 4.78 per cent for the month. Calling for sustained low inflation, Rajan said across the world, people have discovered that allowing inflation to rise eventually has costs, and does not have benefits. He also debunked the growth-inflation trade-off saying the long run trade-off between growth and inflation doesn't exist.

Read more about: rbi, raghuram rajan, inflation, target
Please Wait while comments are loading...
Company Search
Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'