RBI chief rules out a revision in inflation goal

Published: March 11, 2013

image The RBI Governor D. Subbarao has ruled out any revision in its inflation goal while addressing a meeting over the subject “Is there a new normal for inflation?”
Mr. Subbarao asserted that:

  • Much of Indian Economy’s inflation is driven by supply constraints and these could be corrected by appropriate policies and their effective implementation.
  • Accepting a new normal for inflation not only doesn’t has a theoretical or empirical support, but it means the moral hazard of policy inaction in dealing with supply constraints.
  • There is no empirical evidence to establish that the benefits of higher growth outweigh the cost of welfare loss associated with higher inflation.
    Neither theory nor empirical evidence presents a credible case for acquiescing in a new normal for inflation in India

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