Inflation targeting hardly works

The RBI Governor’s reported statement intending to revisit the theoretical framework of the oft-stated sustainable inflation level of 4.0-5.5% prompts the question: Why is India’s inflation, in relation to its actual or potential growth, continuing to remain persistently high, while many of our emerging market (EM) peers seem “apparently” to have lower inflation? After all, almost all emerging economies face the same global commodity prices as inputs, and the increasing turnover on domestic commodities exchanges also serve to transmit global prices to domestic.

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