‘Taming inflation is govt’s top priority’
Nirmala Sitharaman said on Friday. Persistent high inflation will crimp demand, Sitharaman said and added that the tendency to use interest rates as the only solution to tackle inflation has its own downside. “Most economies do have this problem—an obsession of using interest rate as the only tool to deal with inflation," the minister said at the B20 summit, a gathering of top business executives from G20 countries.
“Central banks will have to keep in mind growth and growth-related priorities along with controlling inflation," she said. “Obsession to use interest rates as the only tool to deal with inflation and not manage the supply side factors will not give a complete solution for inflation." Inflation has impacted major economies, and central bankers, especially in the developed world, have moved to address the issue by tightening interest rates. India’s retail inflation shot past estimates to hit a 15-month high of 7.44% in July as food and vegetable prices surged, breaching the Reserve Bank of India’s (RBI’s) inflation target range for the first time since February.
The central bank’s Monetary Policy Committee (MPC) had earlier this month voted to leave the repo rate unchanged at 6.5%. Repo rate is the interest rate at which the RBI lends to commercial banks. Sitharaman also said boosting investments to spur growth is a way to achieving sustained growth, so investments in physical assets need to be raised and be driven by the public sector and complemented by the private sector.
“The public sector has to take the lead until the private sector steps in," the minister said. “To have a large multiplier impact of recovery and growth, investment is the best answer. Labour force participation and improving productivity,
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