Former RBI Governor Bimal Jalan today said that 'inflation targeting' cannot work in India as prices depend on a range of factors like monsoon and oil prices over which neither the RBI nor the government has any control.
"Inflation targeting is fine for countries like the US and the UK. But we (India) are dependent on rain, import of oil from Gulf countries. In India, there is no point in setting inflation target," Jalan said at a function to release a book written by former RBI Governor Y V Reddy.
"What can the RBI do if food prices go up by 40 per cent as a result of monsoon failure?", Jalan questioned. Under the new Monetary Policy Framework, the RBI aims to contain inflation at 4 per cent with a band of (+/-) 2 per cent.
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