India should target inflation at 4-5%, says US expert

There are number of reasons for India, not to bring it (inflation) down too quickly: US expert

Indian policymakers would do well to target keeping annual retail inflation in the country in the range of 4-5 per cent without aiming to lower this rate significantly, according to an American expert.

"India should target inflation at 4-5 per cent," Kenneth Rogoff, Professor of Economics at Harvard University in the US told BTVi in an interview.

"Many people in the advanced economies are saying we should have been at 4 per cent (inflation rate), and not be at 2 per cent, which was a mistake. There is a debate on," he said referring to the prolonged phase of low inflation coupled with low growth being experienced by Western economies.

"I think that if a lot of countries were starting from scratch, I bet they would opt for a 3 per cent target," he added.

Noting "there is no rush to come down to a lower inflation target, the American economist said it is "predictability" that is important in keeping down inflationary expectations.

"In economic theory, which who knows if its true...historically it has been seen that if you are predictable, that's what people expect. People can adjust to any steady inflation rate," Rogoff said.

"There are number of reasons for India, not to bring it (inflation) down too quickly," he added.