Reserve Bank of India\u2019s Governor Shaktikanta Das rejected the proposal of a top government advisor to strip volatile food prices from inflation targets, saying such a move would make no sense to normal consumers.<\/p>\n
Eliminating food, which accounts for nearly half the Asian nation\u2019s consumer inflation basket, would amount to \u201cnot having a target,\u201d the Reserve Bank of India chief said at a Peterson Institute for International Economics forum in Washington on Friday.<\/p>\n
- \n
- Also read: <\/b>RBI Governor Das calls for reforming global financial architecture<\/li>\n<\/ul>\n
\u201cTargeting core inflation without food inflation will make no sense to the average citizen,\u201d he added. \u201cIt\u2019s the headline inflation that the common person understands and should remain that way.\u201d \u00a0\u00a0<\/p>\n
Inflation spiked in September on the back of food prices, with vegetable costs alone surging 36%. That caused economists to dial down expectations for a rate cut, despite the US Federal Reserve\u2019s recent reduction spurring a global easing wave.\u00a0<\/p>\n
- \n
- Also read: <\/b>RBI retains FY25 real GDP and CPI inflation projections<\/li>\n<\/ul>\n
The RBI governor last week said a cut would be \u201cvery, very risky\u201d right now, and reiterated Friday that he wanted to see price growth on a \u201cdurable descent\u201d to the 4% target.\u00a0<\/p>\n
The prescription for inflation-minus-food was floated in July by India\u2019s chief economic adviser V Anantha Nageswaran, who argued that since interest rates can\u2019t control the prices of food, deploying short-term monetary policy tools \u201cto deal with inflation caused by supply constraints may be counterproductive.\u201d\u00a0<\/p>\n
That proposal has divided economists. Jayanth Rama Varma, a former member of the RBI\u2019s rate panel, said there was no evidence that higher food costs are pushing up prices more broadly in the economy. Nomura Holdings Inc.\u2019s Sonal Varma dismissed the suggestion as infeasible in a country where food makes up 46% of the consumer inflation basket.<\/p>\n
More stories like this are available on bloomberg.com<\/a><\/p>\n
- Also read: <\/b>RBI retains FY25 real GDP and CPI inflation projections<\/li>\n<\/ul>\n