T N Srinivasan on Friday questioned the efficacy and relevance of consumer price index-based inflation targeting, suggested by Reserve Bank Deputy Governor Urjit Patel, in the Indian context.
"I have serious reservations about its (CPI-based inflation targeting) relevance and applicability in the domestic context," Mr Srinivasan, Samuel C Park Jr Professor emeritus of economics at Yale University, said in Mumbai.
His remarks came on a day when RBI Governor Raghuram Rajan reiterated his intent to move onto formal inflation targeting based on CPI, as proposed by deputy governor Urjit Patel in a report.
"The empirical framework of this literature (CPI-based inflation targeting) is not behaviourally microfounded and its econometric model is not structural and drawn from such a well-founded theory," said Mr Srinivasan, a former student of IGIDR and batch mate of former RBI Governor C Rangarajan.Wonder what his batch mate thinks about al this.
He ends his comments with these words."I have to share the blame for any fault in his (Patel) committee's report, for not having trained him appropriately," Mr Srinivasan, who taught Mr Patel at Yale University, quipped.He does admit he is a bad teacher at least.
Finally let us see whether the RBI or GOI does accept these recommendations, there are others to judge and one need not taint it before it is judged.