A day after the RBI panel proposed making retail inflation the focus of monetary policy, Economic Affairs Secretary Arvind Mayaram, on Wednesday, said it was premature to use the Consumer Price Index (CPI) as anchor since the data had 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.
“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.
Dr. Mayaram further said that inflation targeting was done in countries which had 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. Dr. Mayaram, however, added that it is important to keep inflation under control and all steps should be taken to curb it.