RBI governor is worried about only one thing! He said- we cannot ignore it

New Delhi. Reserve Bank Governor Shaktikanta Das said on Thursday that no matter what happens, they cannot ignore inflation while deciding monetary policy. After announcing the bi-monthly monetary policy, he said that the weightage of food inflation in the overall consumer price inflation was 46 percent in 2011-12 and it needs to be reconsidered. The National Statistical Office (NSO) is analyzing it.

The Reserve Bank takes into account inflation based on the Consumer Price Index (CPI) while deciding the policy interest rates i.e. repo rate. Das said, ‘The Reserve Bank’s Monetary Policy Committee (MPC) can ignore high food inflation if it fluctuates slightly, but in the current environment of persistently high food inflation, the MPC cannot take the risk of doing so.’

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He said – we have to be cautious
He said the MPC will have to remain vigilant to prevent cascading effects or second round effects from persistently high food inflation and to maintain the gains made so far. Chief Economic Adviser V Anantha Nageswaran had advocated keeping food inflation out of the rate setting process, saying monetary policy has no bearing on food prices, which are determined by supply-side pressures.

Inflation formula may change
Das refused to comment in detail on what he said in his written statement, but he did say that the weight of food in the CPI may change based on the findings of the NSO survey. He said that the current CPI group is based on the data of the year 2011-12 and it could not be reviewed due to the Covid pandemic.

Inflation rate will come down soon
Das said the RBI is in regular contact with the government on the supply-side response to inflation and also discusses floods and heavy rains. Heavy rains in one district of Kerala and parts of Himachal Pradesh will have some impact on prices, but overall the monsoon is seven per cent above the long-term average which will have a positive impact on food inflation and bring inflation down.

Tags: Business news, RBI Governor, RBI Policy