Raghuram Rajan warns taking food off inflation table will be the wrong recipe
Raghuram Rajan, former Reserve Bank of India (RBI) Governor, has cautioned against excluding food prices from inflation calculations. As inflation remains a key concern for the central bank, Rajan's stance is that removing food inflation from headline inflation targets could erode public's 'great faith' in the central bank's ability to manage the broader economic picture.
«So, if you leave out some of the most important parts of inflation and tell them, inflation is under control, but food prices are going through the roof… they would not have great faith in the Reserve Bank,» Rajan told PTI in an inerview.
Food prices have always played a significant role in shaping India's inflation picture. The current consumer price inflation (CPI) basket assigns a weight of 46% to food, a figure that many argue needs to be revisited as consumption patterns evolve. Nevertheless, Rajan maintains that food prices cannot be dismissed, as they constitute a significant portion of household spending and influence how the general public perceives inflation.
Also Read: There's too much food on table to make Indians and RBI worry
In the Economic Survey 2023-24, India's Chief Economic Advisor V Anantha Nageswaran advocated for excluding food inflation when setting benchmark interest rates. Nageswaran’s argument is that monetary policy has limited influence over food prices, which are largely dictated by supply-side factors.
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