RBI chief rules out a revision in inflation goal

March 11, 2013

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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