There has been a steady decline in trend inflation in India, the Reserve Bank of India noted in a Working Paper titled Measuring Trend Inflation in India . The Paper is authored by Harendra Kumar Behera and Michael Debabrata Patra. Central to the design and conduct of monetary policy is the concept of trend inflation, the level to which actual inflation outcomes are expected to converge after short run fluctuations from a variety of sources die out. The paper seeks to estimate trend inflation in India to find the answer to a question that goes to the root of flexible inflation targeting (FIT) - is the choice of the target for inflation consistent with its trend?
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Inflation target should be maintained at 4% smetimes.in - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from smetimes.in Daily Mail and Mail on Sunday newspapers.
If it ain t broke, don t fix it : RBI working paper says 4% inflation target is good for India
Recently there were speculations that the government could ask the MPC to loosen the inflation target to facilitate a growth supportive policy. December 29, 2020 / 09:29 PM IST
A Reserve Bank of India (RBI) working paper authored by Harendra Kumar Behera and Michael Debabrata Patra has said maintaining the inflation target at 4 percent is appropriate for India.
The paper, titled ‘Measuring trend inflation in India’, said there was a steady decline in trend inflation to 4.1 percent-4.3 percent since 2014.
It said fixing an inflation target too below the trend imparts a deflationary bias to monetary policy because it will go into overkill relative to what the economy can intrinsically bear in order to achieve the target.
Updated Dec 28, 2020 | 22:23 IST
The paper authored by Harendra Kumar Behera and Deputy Governor Michael Debabrata Patra finds a steady decline in trend inflation to 4.1-4.3% since 2014, until just before the pandemic. Representational Image | Photo Credit: IANS
Key Highlights
A target set too below the trend imparts a deflationary bias to monetary policy, said the paper A target that is fixed above trend renders monetary policy too expansionary and prone to inflationary shocks and unanchored expectation, it further added.
India s inflation target is set for review in March 2021
The Reserve Bank of India on Monday issued a working paper on measuring trend inflation in India which is authored by Harendra Kumar Behera and Deputy Governor Michael Debabrata Patra. Released ahead of the review of the inflation target in March 2021, the paper argues that maintaining the inflation target at 4% is appropriate for India. As per the current mand