Centre, RBI differ on relaxing inflation targets

Sandeep Dikshit

Tribune News Service

New Delhi, March 13

The Centre’s Chief Economic Adviser Krishnamurthy Subramanian has once again called for prioritising growth over inflation which has breached the band of 4 % with a 2 % deviation either way.

The observation comes at a time there are reports of the Government in favour of the RBI relaxing the target to 5 % with 2 % deviation either way. But RBI governor Shaktikanta Das said last month that there was no need to change the current target band.

The country requires growth at this juncture as it aspires to increase its dominance and self-reliance in the global economy, he said at a virtual annual regional meeting of the CII, Eastern Region. In other words, the Centre does not want the RBI to tighten the monetary policy to control inflation by raising the interest rate for borrowing from the banks.

As inflation has risen, Subramanian has advocated that the RBI should adopt another matrix for measuring it. The observations come ahead of a review on March 31 by the RBI’s Monetary Policy Committee of the policy framework and inflation targets.

The Chief Economic Adviser has suggested that the RBI should consider adopting core inflation as an indicator, which excludes the impact of food and fuel prices. He has also suggested the need to update the base year of 2011-12.

This will be the first review by RBI since June 2016 when it was asked to frame policies so that the mandated inflation target is 4 % with a 2 % deviation either way.

“At this juncture we must focus on growth and when it comes to pressures for trade-offs, we must be leaning on growth,” Subramanian said.

Indirectly seeking a change, he said RBI’s tools mainly addressed demand-side factors but the current inflation target was affected by food prices, which was largely dependent on supply-side measures.

Earlier, he had suggested reviewing household consumption items for the collection of monthly consumer price data to reflect the change in consumption patterns.

He lamented that healthcare studies for Auyushman Bharat have shown that rates of the private sector hospitals were six to seven times higher than government hospitals. The readmission rates in private hospitals were also considerably higher. The notion of ‘Atmanirbhar Bharat’ can be realised if the private sector adopts the concept of “Shubh Labh” (ethical profit) and not profiteer at a time when the Government is about to shed all its business activity.