Union Commerce Minister Piyush Goyal has suggested that the Reserve Bank of India lower interest rates to support economic growth, reported PTI.
Speaking at an event hosted by CNBC-TV18 on Thursday, Goyal also said that food prices should not heavily influence monetary policy decisions.
“I certainly believe they [Reserve Bank] should cut interest rates.” said the minister. “Growth needs a further impetus.”
Goyal added that giving too much weight to food inflation while deciding interest rates was “an absolutely flawed theory”.
Goyal emphasised that these were his views and not the official stance of the Union government. He also noted that the chief economic advisor had made a similar recommendation in the 2023-’24 Economic Survey, which highlighted that India’s monetary policy framework should target inflation excluding food prices, as supply factors impact them more than demand.
India’s retail inflation reached a 14-month high in October, driven by a significant rise in vegetable prices, dampening expectations for a potential rate cut by the Reserve Bank next month.
The Reserve Bank, which aims to keep consumer price index-based inflation at 4%, within a 2 percentage point range on either side, has maintained its commitment to this target.
In August, Reserve Bank Governor Shaktikanta Das stated: “The public at large understands inflation more in terms of food inflation than the other components of headline inflation…Therefore, we cannot and should not become complacent merely because core inflation has fallen considerably.”
On Thursday, Das reiterated that while the change in the monetary policy stance in October offered the Reserve Bank flexibility to adapt, it was necessary to remain cautious.
High food inflation has also impacted middle-class budgets and curbed urban spending, posing a risk to India’s strong economic growth over the past few months, reported PTI.
The Congress on Wednesday said that Goyal’s remarks showed “extreme insensitivity” and raised concerns about the independence of the Reserve Bank of India.
“A senior and influential minister is publicly saying that the RBI should NOT consider food inflation while determining interest rates,” Congress leader Jairam Ramesh said on social media. “Aside from raising concerns about the RBI’s independence, this statement also shows extreme insensitivity.”
Food inflation had been “raging for quite some time now” and had crossed double digits, he said.
“It is a very large component of the budgets of India’s families, and absolutely needs to be considered when setting monetary policy rates,” Ramesh said. “The non-biological PM’s [Narendra Modi] Government knows only one trick: if the data doesn’t suit them, they will change the data altogether.”