CEA pitches for refining inflation target band

by Nidhi Bhati

Chief Economic Adviser (CEA) Krishnamurthy Subramanian has called for refining the inflation target band to reflect demand-side factors. In an interview to Reuters, Subramanian explained that there is a need to refine the monetary policy target as the central bank’s tools mainly addressed demand-side factors, while the current inflation target was affected by food prices, primarily dependent on supply-side measures. Food prices, which contribute nearly half of the consumer price index, have significantly affected headline CPI inflation in the last year, he added. Subramanian believes that core inflation could be a better indicator to target. He also suggested that there was a need to update the base year of 2011/12 and review household consumption items for the collection of monthly consumer price data to reflect the change in consumption patterns.

References
1. https://www.business-standard.com/article/economy-policy/india-s-inflation-target-band-needs-adjustment-says-cea-subramanian-121022201208_1.html