Premature to use CPI as anchor for inflation target: Mayaram

Tags: News
A day after a RBI panel proposed making retail inflation the focus of monetary policy, Economic Affairs Secretary Arvind Mayaram today said it is premature to use the consumer price index as anchor since the data has imperfections.

"CPI has lot of imperfections. It requires a whole lot of sophistication which we have not achieved yet on determining CPI... So it is, in my opinion, a little premature to consider CPI as the anchor of our inflation target," he told a TV channel here.

The panel, headed by Urjit Patel, recommended that the Reserve Bank should bring down Consumer Price based Index (CPI) or retail inflation to 8 per cent over the next 12 months, and to 6 per cent over the next 24 months.

"CPI has (a) very large element of food. We know food inflation cannot be curbed purely through monetary policy... So, there are other structural issues that need to be addressed, if we need to control food inflation," he said.

Mayaram further said that inflation targeting is done in countries which have more stable kind of pricing.

"In India, it may be difficult to do that kind of targeting... We don't have as yet achieved that level of stability in the prices where we can curb certain volatilities or volatility in certain periods through a very specific targeting," he said.

Mayaram, however, added that it is important to keep inflation under control and all steps should be taken to curb it.

Retail inflation fell to a three-month low of 9.87 per cent in December. The rate of price rise in food and vegetables segment stood at 12.16 per cent.

There is inelasticity of demand as far as food is concerned, Mayaram said, adding that even if inflation is higher it does not mean that people will start eating less just because interest rates are higher.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • The current value of the rupee does not merit market intervention

    The rupee, losing 40 paise per month against the dollar since May, is expected to remain under pressure till the calendar runs out on December 31, bef

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Tushar Gandhi

Sustainable model for rural sanitation

Prime minister Narendra Modi has promised to build a toilet ...

Zehra Naqvi

How smells evoke strong memories

Remember that time when a passing fragrance transported you to ...

Dharmendra Khandal

Indian zoos need a fresh approach

Recently, when a man jumped in a tiger trench of ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture