RBI Looking to Get Control of Prices

India is moving aggressively to get prices under control, and that is likely to mean lower economic growth for the near future.

Late Tuesday, a panel created by Reserve Bank of India Governor Raghuram Rajan advised the central bank to make significantly lower consumer prices the central target of its monetary policy.  If the central bank does so, which seems likely, that will likely mean higher interest rates and slower growth.

That’s because India until now has used wholesale prices as its benchmark inflation gauge. This measure, which excludes the massive service sector, has typically been much lower than consumer prices.


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