Union Commerce and Industry Minister Piyush Goyal shared his view that food price inflation should not play a role in the Reserve Bank of India’s interest rate decisions ( RBI).

Speaking at a CNBC-TV18 event in Mumbai, Goyal described the link between food inflation and interest rates as an “absolutely wrong theory”.

His comments came shortly after RBI Governor Shaktikanta Das warned that inflation risks could rise due to factors such as food prices, saying a rate cut is unlikely be considered.

During the event, RBI Governor Shaktikanta Das, who spoke after Goyal, reiterated the importance of managing inflation, highlighting several risks that could impact economic growth and stability prices.

Soon after Union Minister Piyush Goyal on Thursday suggested that the RBI might consider cutting interest rates, Governor Shaktikanta Das responded that he would “reserve” his remarks until the policy review December monetary policy.

Asked specifically about Goyal’s recommendation to cut the repo rate, Shaktikanta Das replied with a smile: “The next monetary policy will come in the first week of December. I would like to reserve my comments on that. Thank you.”

He said: “A soft landing has been assured, but risks of a return of inflation and a slowdown in growth remain. »

Shaktikanta Das highlighted the challenges of global conflicts, commodity price fluctuations and climate change, which continue to put pressure on inflation. Despite Goyal’s comments, Das refrained from directly addressing them and instead focused on broader inflationary pressures.

ECONOMIC RESILIENCE AMID CHALLENGES

In his speech, Das highlighted India’s economic resilience, citing strong growth and its ability to withstand external pressures. “India’s economic growth remains resilient; inflation is expected to moderate despite periodic bumps, and the external sector is robust,” he said.

He acknowledged that the economy has faced prolonged turbulence, and yet India continues to demonstrate resilience in the face of new challenges. Das attributed this resilience to efforts by the RBI and the government to control inflation, including initiatives to reduce food prices.

Goyal’s view on food inflation and rate policy

Goyal criticized the inclusion of food inflation as a factor in interest rate decisions, explaining that food inflation is largely the result of supply and demand rather than a monetary problem . “I think it is an absolutely wrong theory that food inflation should be taken into account when deciding on the structure of interest rates. This (food inflation) has nothing to do with inflation management. It’s a supply and demand situation,” Goyal said. .

Goyal suggested that policymakers and regulators should engage in discussions involving all stakeholders, including economists outside the RBI, to determine whether food inflation should be part of the decision-making process regarding inflation targets and targets. interest rate. According to him, the factors causing food inflation differ from those affecting core inflation and therefore require different management strategies.