Flexible part of inflation targeting worked well: MPC's Bhattacharya

As long as a clear and well-defined target is established, the flexible inflation framework is robust enough to guide policy decisions, while revisiting outdated approaches, such as the multiple indicators framework, would be counterproductive, said Saugata Bhattacharya, an external member of the Reserve Bank of India's Monetary Policy Committee (MPC).

- ANJALI KUMARI

He said monetary frameworks, particularly those related to inflation targeting, must undergo continuous reassessment to remain effective in a dynamic economic environment. The flexibility inherent in inflation targeting has proven invaluable, especially during times of crisis.

"Frameworks need to be continuously reassessed, the flexible part of inflation targeting has served well, in the times of crisis. So as long as the target is established, we are okay... we should not go back to the old multiple indicators approach in terms of monetary policy," said Bhattacharya.

The RBI's inflation target is set at 4 per cent, with a flexible band of 2 per cent on either side. After surpassing the upper tolerance band in October, headline inflation has since moderated, reaching a five-month low of 4.3 per cent in January.