Which inflation should the RBI target?

.......Clearly, the RBI should not target inflation measured by WPI alone. A more relevant operative target for monetary policy – as it is for many central banks in countries such as Canada, Finland, Thailand or South Africa – is core inflation. In India, core inflation – which can exclude fruits and vegetables, milk and edible oils – would measure the imbalance in the economy or the gap between ex ante savings and investment. Therefore, the RBI should at least use core inflation as a supplementary indicator while targeting WPI.

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