{"id":175449,"date":"2024-11-15T09:05:57","date_gmt":"2024-11-15T09:05:57","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/11\/15\/targeting-food-inflation-with-rates-is-flawed-theory-piyush-goyal-times-of-india\/"},"modified":"2024-11-15T09:05:57","modified_gmt":"2024-11-15T09:05:57","slug":"targeting-food-inflation-with-rates-is-flawed-theory-piyush-goyal-times-of-india","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/11\/15\/targeting-food-inflation-with-rates-is-flawed-theory-piyush-goyal-times-of-india\/","title":{"rendered":"Targeting food inflation with rates is \u2018flawed theory\u2019: Piyush Goyal – Times of India"},"content":{"rendered":"
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Union minister Piyush Goyal<\/span><\/div>\n<\/section>\n<\/div><\/div>\n

MUMBAI: Commerce minister Piyush Goyal<\/a> called upon RBI<\/a> to cut rates, arguing that targeting food price inflation through interest rates was an \u201cabsolutely flawed theory\u201d. His statement came days after RBI governor Shaktikanta Das warned of upside risks to inflation from factors like food prices and said that a rate cut should not be taken for granted.
While Das did not react to Goyal\u2019s comment in his speech \u2014 which followed a conversation with the minister \u2014 he did refer to inflation risks re-emerging. \u201cA soft landing has been ensured, but risks of inflation coming back and growth slowing down remain. The headwinds from geopolitical conflicts, geo-economic fragmentation, commodity price volatility, and climate change continue to blow,\u201d Das said. The minister and RBI governor spoke at a CNBC-TV18 event in Mumbai on Thursday.<\/p>\n

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\u201cToday, India\u2019s economic growth remains resilient; inflation is expected to moderate despite periodic humps, and the external sector is robust. Without being complacent, let me end by saying that the Indian economy<\/a> has sailed well through the prolonged period of turbulence and exhibits resilience in the face of constantly emerging new challenges,\u201d Das said. In earlier months, he had highlighted the significance of food prices on inflation expectations among the public.
In his speech, Das noted how RBI and govt have worked together to bring down prices too. While historically, other govt departments have been making representations for easier interest rates, this time is different because the call for a rate cut has been backed by the chief economic advisor asking RBI to look through food inflation. Also, unlike in the past, RBI has been highlighting how it has been working in tandem with govt to control prices.
\u201cI think it\u2019s an absolutely flawed theory that food inflation should be considered while deciding on the interest rate structure. It (food inflation) has nothing whatsoever to do with managing inflation. That\u2019s a demand-supply situation,\u201d Goyal said. He supported his argument by quoting chief economic adviser V Anantha Nageswaran on the topic. \u201cThat\u2019s not something that is being hoarded or stocked in large numbers. I think it\u2019s time that policymakers and regulators seriously sat down, discussed with all stakeholders, with economists, even beyond their own, and came to a considered view of whether food inflation should at all be a part of the decision-making for inflation or interest rates,\u201d he added.
At the same event, former RBI governor C Rangarajan said there was a need for a deeper discussion on the interplay between savings, investment and demand. He said that, on the one hand, investment has increased and it needs to be financed by increased savings. But on the other, if consumption\/demand is not increasing, it raises a fundamental issue about at what point in the economy\u2019s development the demand factor begins to dominate over savings and investment factors.<\/div>\n