CPI needs rejig

But MPC has reasons to not ignore headline inflation

After the presentation of the Union Budget later this week, focus will soon shift to the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI). While the course of the monetary policy will be influenced by the Budget, market participants would be keen to see how the rate-setting committee deals with the inflation surprise. Inflation, based on the consumer price index (CPI), rose sharply to 7.35 per cent in December, exceeding the central bank’s upper end of the target band. Analysts expect retail inflation to remain elevated for some time, partly because of the telecom tariff hike.