Under the new Monetary Policy Framework, the central bank aims to contain inflation at 4 per cent with a band of (+/-) 2 per cent.
Bhalla pointed out that average inflation in 2017-18 was 3.5 per cent.
"Obviously for RBI that was very very high...India's real interest rate is higher by 2.5 per cent, which is 3rd highest in the world, India's real repo is soon going to be second highest in the world.
Bhalla said India's CPI inflation is based on 2011 base year, and has a food inflation share which is much higher than what it should be.
"... So, we should be looking at services and wage inflation," he suggested.
The EAC-PM also pointed out that fiscal deficit provides zero clues about the slowdown in inflation as from 1996-2007, India's fiscal deficit continuously went up but inflation systematically came down.
"Procurement prices explain inflation in India, not fiscal deficit or output gap," he observed.
Bhalla said India's average inflation between 1996-2004 excluding onion year in 2008 was 4 per cent and average inflation rate in 2006 to 2013 was highest in Indian history.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)