Radical Changes to India Inflation Regime Are Risky, Study Shows
High food prices is the main reason the central bank has kept interest rates unchanged for over a year now.
Photographer: Kanishka Sonthalia/BloombergThis article is for subscribers only.
India’s government should not alter the inflation-targeting framework adopted by the central bank to focus on core inflation, which excludes volatile food and fuel prices, as doing so would be counterproductive, according to a study.
The paper by think-tank National Council of Applied Economic Research addresses the ongoing debate among policymakers over whether food prices should be stripped from inflation targeting. Economists argue that this approach is not feasible in a country like India, where food makes up nearly half of the consumer price index basket.