Loan EMI increased The demand for providing relief has now been raised from the government. Commerce and Industry Minister Piyush Goyal said on Thursday that the Reserve Bank of India (RBI) should cut interest rates and accelerate growth. Chartered Accountant (CA) turned politician Goyal said in a TV program that due to food inflation, the RBI has not been able to take any action in rate setting for two years. The use of food inflation in determining interest rates is a 'flawed theory'. Goyal said, “I believe they should cut interest rates. There is a need to further promote growth. We are the fastest growing economy in the world, we can do even better.”
RBI Governor refused to comment
Later in the same program, RBI Governor Shaktikanta Das refused to comment on the senior minister's suggestion. He said the six-member rate fixing committee would take an appropriate decision in its next meeting to be held in the first week of December. Goyal's demands were also supported by finance industry veteran Deepak Parekh. He said that RBI should cut the repo rate and also consider the cash reserve ratio (CRR). Chief Economic Advisor (CEA) G. Ananth Nageswaran had suggested not including food inflation in the headline inflation calculation. Goyal said he has been in favor of not including food inflation in rates for the last 20 years, even when he was in the opposition.
Retail inflation reached 6.2 percent in October
He said, “I have consistently said that it is a flawed principle that food inflation should be considered while deciding on the interest rate structure. Food inflation has nothing to do with managing inflation. This is a demand-supply situation.” Goyal, who had earlier held the Consumer Affairs Ministry, said that storage or hoarding of food grains is not done on a large scale. “Now is the time for policy makers and regulators to sit seriously, discuss with all stakeholders, economists and come to a conclusion whether food inflation should be a part of decision making on inflation or interest rates,” he said. It is worth noting that the RBI under Das had earlier objected to such arguments. Retail inflation has reached 6.2 percent in October, which is higher than the target set by the government for RBI.
Inflation will decrease in December and January
Goyal said inflation will ease in December and January once the base effect kicks in. He said that other factors like festive season etc. also play a role behind the high CPI numbers. He said there has been coordinated action between the RBI and the government to reduce inflation for the last five-six years and the last decade has seen the lowest inflation during the tenure of any Prime Minister in the history of India. Meanwhile, the Commerce Minister said there is a 'massive' increase in private capital expenditure, and companies will have to look at reducing costs to increase sales in a market of 140 crore consumers.
Image Credit: India_Tv.