RBI might not meet inflation target: IMF

RBI might not meet inflation target: IMF: RBI will be required to meet retail inflation target of four per cent, plus or minus two per cent, over the next five years...

RBI’s inflation target

This refers to the report “RBI might not meet inflation target: IMF” (Business Standard, August 15). It is unfortunate that a research paper by three scholars on “Monetary Transmission in Developing Countries: Evidence from India” in which authors have expressed their personal views has been relied to give an impression that IMF has made some predictions on how inflation will move in India post-MPC. Remember, though there has been broad agreement on inflation-targeting and RBI’s role in it, the Monetary Policy Committee itself is yet to be constituted!
Conceding, for argument, RBI fails in achieving the target ‘given’ by GOI. The only condition of the contract is that RBI need to give reasons for that. Much will depend on what GOI does on the fiscal policy management. Both GOI and RBI are aware of the nature of roles to be played by government and the central bank in ensuring optimum economic growth. Inflation target cannot be compared to a target given to a worker in a primitive cashew factory. As in the past, there will be ongoing consultations between GOI and RBI on fiscal and monetary policy issues and
changes/corrections in projections will be part of the game.

G Warrier, Mumbai


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