New Delhi, Nov. 21 -- Inflation is bad. This is such a ho-hum truth that it often takes dramatic exaggeration to grab attention. Among other things, it has been called an 'unlegislated tax,' a 'savings thief' and a 'mugger.' But why do central banks aim for not just 'low' but 'low and stable' inflation? Is too slow a rise in the cost of living equally bad?

This question has been raked up by India's retail price index; it was flat in October, with the general level of prices up merely 0.25% over the same month last year. About a decade after the Reserve Bank of India (RBI) was given an explicit inflation target of 4% (with leeway of 2 percentage points up or down), its forecast for fiscal 2025-26 is 2.6%.

Although RBI projects inflation ...