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.

EDITORIAL OF THE DAY

  • Public musn’t pay for domestic servants for our diplomats

    Nothing seems to have changed in the year and half since the fur that flew thick and fast over the case of diplomat Debjani Khobragade and her maid Sa

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

TODAY'S COLUMNS

Urs Schoettli

Economic integration in east Asia

As trade agreements within a global framework have become increasingly ...

Rajgopal Nidamboor

Up the ante of your conscious existence

It sounds cryptic, but is not as complex as it ...

Gautam Gupta

The ‘fake’ issue needs to be taken seriously

E-commerce players are witnessing unbelievable growth globally. Competition is increasing ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture