The Reserve Bank of India (RBI) and the Union government appear to be on a collision course with regard to the inflation-targeting mechanism which is up for review just when Assembly polls are due in four states, including Bengal.

The possibility of an impending face-off was visible from chief economic adviser Krishnamurthy Subramanian's contention in a media interview about the need to “refine’’ the monetary policy target. Subramanian said the RBI’s tools mainly addressed demand-side factors, while the current inflation target was affected by food prices, which was largely dependent on supply-side measures.

He said that core inflation — which strips out the effects of food and fuel prices — could be a better indicator even as he pointed out that there was a need to update the base year of 2011-12.

The chief economic adviser also suggested the review of household consumption items for the collection of monthly consumer price data to reflect the change in consumption patterns in the country.

Krishnamurthy’s remarks may indicate that the government is keen to change the current medium term target of four per cent with a band of two per cent on either sides. There have been reports the Centre is looking to relax the target to five per cent with a band of +/- 2 per cent.

This, however, is different from what the RBI wants. Earlier this month, RBI governor Shaktikanta Das had said that there was no need to change the current target set for the monetary policy committee.

“By March 2021, the Government would be reviewing the inflation target for the next five years. The experience with successfully maintaining price stability and the gains in credibility for monetary policy since the institution of the inflation targeting framework, barring the Covid-19 period, needs to be reinforced in the coming years,’’ he had said after the interest rate setting body retained the policy repo rate.

Observers, however, said the Centre takes the opinion of the RBI in fixing the inflation framework. There have been instances of sharp disagreements between the central government and Mint Street in the past. But relations have been cordial after Das assumed office in December, 2018.