Economists back headline CPI as India's inflation target, stressing food's heavy weight in consumption and urging RBI to retain the 4% benchmark with the current tolerance band

Headline inflation should continue to be the target, says BS poll

Retail Inflation: The Unwavering Benchmark

In a unanimous decision echoed by ten economists polled by Business Standard, India should retain its retail inflation rate as the key benchmark for monetary policy. This consensus holds firm even as India navigates its middle-income status, where food prices will continue to significantly impact the Consumer Price Inflation (CPI) basket, even with upcoming revisions.

This strong opinion follows the Reserve Bank of India's (RBI) recent release of a discussion paper. The paper precedes the crucial second review of the inflation-targeting framework (FIT), scheduled for completion by March 2026.

Adding fuel to the debate, the FY24 Economic Survey recommended a thorough re-evaluation of the current inflation targeting framework. The survey highlighted:

The enduring significance of food prices: Even with a revamped CPI basket, food will remain a major factor influencing inflation.
The need for a robust framework: The survey implicitly called for a reevaluation of the current framework to ensure its continued effectiveness.

The RBI's upcoming decision will undoubtedly shape India's economic trajectory in the coming years. The weight of expert opinion, however, currently points strongly towards maintaining the status quo.