Reflecting on differences within the Reserve Bank, noted economist and RBI's independent director Indira Rajaraman today said the central bank should not follow a straightjacket approach of controlling inflation.
"I think the RBI made things harder for itself by this straightjacket approach of committing themselves to inflation targeting when whole world has abandoned this and has adopted financial stability as the objective of monetary policy," Rajaraman said at an event.
RBI Governor Raghuram Rajan, who has been under fire for keeping the interest rates high for long, is targeting to keep CPI inflation at 8 per cent in January 2015 and reduce it further to 6 per cent by 2016.
The Central Bank in its third bi-monthly review of the monetary policy last month left all the key policy rates unchanged citing inflationary pressure, but cut SLR by 0.50 per cent to 22 per cent.
India's economic growth has slipped to sub-5 per cent in 2013-14 and 2012-13 fiscals. In the current financial year, RBI estimates the growth to be 5.5 per cent.
In the first quarter of 2014-15 fiscal, the GDP improved to 5.7 per cent, from 4.6 per cent in the corresponding period a year ago.
Food inflation in July stood at 8.43 per cent. The retail inflation was 7.96 per cent and WPI inflation was 5.19 per cent.
