The right framework

Inflation debate must look at the downsides of alternatives

An interesting and lively debate, including on this page, has ensued on India's inflation targeting, after this year's Economic Survey in July suggested that the framework should consider targeting inflation excluding food. Economists in the finance ministry reasoned that higher food prices are often supply-induced rather than being demand-driven.

Further, short-run monetary policy tools are meant to contain price pressures emanating from excess aggregate demand growth. Several commentators have argued that this debate is settled and the Reserve Bank of India (RBI) must continue with the current framework because it has served India well. In this regard, in a piece published in Mint this week, Chief Economic Advisor V Anantha Nageswaran noted: "Nothing is settled in science, more so in social sciences." It's hard to quibble with the argument. Policies, particularly in a large and complex economy like India, should indeed be constantly debated and refined with changing realities and development needs.