Need to focus on growth, says Mayaram ahead of RBI policy

Tags: Mayaram, RBI, Economy
Ahead of the RBI's monetary policy review, Economic Affairs Secretary Arvind Mayaram has pitched

RELATED ARTICLES

for shifting the policy focus to growth as interest rates do not have a bearing on food inflation.

"I will not like to second-guess the RBI at all...I will fervently appeal to anybody who listens to us that they should vote in favour of growth and take decisions accordingly," he told PTI.

The Reserve Bank, which has increased interest rates twice to contain inflation since Raghuram Rajan took over as Governor in September, has scheduled the Third Quarter Review of Monetary Policy on January 28.

At the Mid-Quarter Monetary Policy Review on December 18, the RBI kept the policy repo rate unchanged at 7.75 per cent and said it would act if warranted so that inflation expectations stabilise and an environment conducive to sustainable growth takes hold.

The RBI may have a tough time deciding its policy stance in view of contracting industrial output and rising inflation.

While industrial output shrank 2.1 per cent in November, touching the lowest level in the past six months, inflation measured by the Wholesale Price Index rose to a 14-month high of 7.52 per cent in the same month.

Mayaram argued that demand for food products is inelastic and is not influenced by the movement in interest rates.

"I don't think there will be much of an impact of increase in interest rates on food inflation, on other inflation, yes.

"Now there is a purist theory that overall demand gets suppressed if interest rates are higher. We don't see that evidence. In last four years, the RBI has increased policy rates almost 24-25 times. But it has had no impact on food inflation. So there is no evidence to show that it does," he said.

Food inflation in November stood at 19.93 per cent, driven mainly by a 95.25 per cent spurt in prices of vegetables alone.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • But what’s the big deal about Modi’s first hundred days?

    That Indians believe more in symbolism than substance is a fact that is well acknowledged and chronicled.

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Urs Schöttli

West Asia turmoil worries east Asia

From Beijing to Jakarta, from Manila to Tokyo, east Asian ...

Purnendu Ghosh

Memory is a collage of the old and new

We are all fitted with pressure valves. Some of us ...

Shona Adhikari

The enduring legacy of <em>The Last Supper</em>

This week’s column features a work of art that is ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture