‘RBI inflation goals need to be reviewed’

Bloomberg

India’s new government should review the central bank’s inflation goals, including whether consumer pri-ces or the underlying core measure is the appropriate target to use to determine interest rates, an economic adviser to the current prime minister said.
Speaking in his personal capacity, and not as a member of Prime Minister Narendra Modi’s Economic Advisory Council, Rathin Roy said the Reserve Bank of India’s inflation target should be relooked at after the elections, given that the current mandate expires at the end of March 2021. The RBI’s goal is to keep inflation at 4 percent over the medium term.
“We need to decide what sort of macroeconomic framework we want going forward,” said Roy, who is director of the National Institute of Public Finance and Policy in New Delhi. Those discussions and decisions will take time and a new administration should therefore “start immediately” to get the process going, he said.
The RBI has in the past faced criticism for largely overstating inflation, forecasts that were then used to underpin the monetary policy committee’s hawkish policy stance and two interest-rate hikes in 2018. In February, Deputy Governor Viral Acharya said the unpredictability of food prices was the reason for inflation forecasts going awry.
The RBI made a surprise U-turn on monetary policy this year under new Governor Shaktikanta Das after food prices fell.