Because monetary policy works with a lag of around three or four quarters. In other words, the problem is with forecasting food prices rather than the rest of the consumption basket. In other words, there are separate forecasts for food inflation within the overall inflation forecasting framework. Economists in RBI and the private sector depend on such data to understand the direction of food prices in the next few weeks. Second, RBI should consider getting more agricultural economists into its policy process, be it as staff economists, outside advisors or even as members of the Monetary Policy Committee.

Source: Mint May 07, 2019 16:07 UTC