Consider keeping food prices out of inflation target: CEA
The short-term outlook for India’s inflation trajectory is benign, with the pace of price rise likely to align with the 4% target by 2025-26, according to Chief Economic Advisor V Anantha Nageshwaran in the Economic Survey. He suggested an inflation targeting framework excluding volatile food prices, as higher food prices are typically supply-induced rather than demand-induced. The Survey noted that using short-run monetary policy tools to address supply-induced inflation could be counterproductive.
The short-term outlook for India’s inflation trajectory is benign and the pace of price rise is likely to align with the 4% target by 2025-26, Chief Economic Advisor V Anantha Nageshwaran said in the Economic Survey, even as he suggested adopting an inflation targeting framework that keeps volatile food prices out of the equation.
“Higher food prices are, more often, not demand-induced but supply-induced. Short-run monetary policy tools are meant to counteract price pressures arising out of excess aggregate demand growth. Deploying them to deal with inflation caused by supply constraints may be counterproductive,” the Survey’s authors noted.
Source Link : https://www.thehindu.com/business/consider-keeping-food-prices-out-of-inflation-target-cea/article68434129.ece
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