The Reserve Bank of India (RBI) should cut the key benchmark interest rates to boost economic growth and ignore food prices while deciding on monetary policy, Union minister of commerce and industry Piyush Goyal said here on Thursday.
Speaking at the Global Leadership Summit organised by CNBC TV18, Goyal said that it’s an “absolutely flawed theory” to consider food inflation while deciding on rates. He, however, clarified that these statements were his personal views and not those of the government.
The Economic Survey of 2023-24 had earlier stated that the monetary policy framework should consider targeting inflation that excludes food, which is influenced more by supply than demand. Retail inflation rose to a 14-month high in October, primarily driven by a hike in vegetable prices. This, in turn, has reduced the hopes of an interest rate cut from RBI next month. Goyal said inflation will come down by December.
RBI governor Shaktikanta Das, however, said in August that India cannot and should not become complacent merely because core inflation has fallen considerably. “The public at large understands inflation more in terms of food inflation than the other components of headline inflation,” he said.
On boosting consumption slowdown, Goyal advised companies to cut prices.
“There is a huge competitive edge manufacturing in India gives you, so I think if smart business people start offering better pricing, better value for money, I am sure the market will give them a boost. It is for them to decide whether they want to sit on high margins,” Goyal said.
Multiple consumer goods companies have alluded to a slowdown in demand, particularly in urban markets, which is reflected in their September quarter earnings performance as well.
“I am one of those who believes that economies of scale, that the huge demand that 1.4 billion Indians provide, the demand that our growing economy, our growing income levels offers, is unmatched and the affordability, the competitive edge that this economy of scale gives you, will help you not only meet India’s need but also international demand,” Goyal said.
He asked investors to look at the long-term picture and not panic about every quarterly result. “At least we in the government don’t work on a “quarter se quarter tak” philosophy. I think it’s time investors also looked at the long term and not panic every quarter,” Goyal said.