Chief Economic Advisor (CEA) V Anantha Nageswaran on Tuesday said retail price inflation was largely driven by a few key commodities, namely tomato, onion, potato (TOP), gold and money. Without these elements, he noted, the inflation rate would fall to around 4 percent.

This comes a day after Finance Minister Nirmala Sitharaman highlighted that bank interest rates will have to be much more affordable at a time when industries want to expand and move, building capacity. Commerce Minister Piyush Goyal also said last week that the RBI needs to cut interest rates and that considering food inflation to decide on a cut in benchmark interest rates was a wrong theory.

Speaking at the 11th SBI^th Anantha Nageswaran of the Banking and Economics Conclave said, “We know that CPI inflation (based on consumer price index) is very much influenced by a few commodities. Excluding tomato, onion, potato (TOP), gold and silver, the overall CPI rate is 4.2 percent.

“So the items – TOP, gold and silver – which together make up 3.4 percent by weight account for more than a third of the 6.2 percent inflation rate you saw for the month of october.”

The latest economic study, carried out by the CEA team, highlights that India needs to re-examine its current inflation targeting framework and explore one that would target an inflation rate excluding the volatile food component.

This contrasts with the RBI’s position. In his August monetary policy statement, RBI Governor Shaktikanta Das emphasized that the target of the monetary policy committee is headline inflation, in which food inflation has a weight of around 46%. hundred.

“With this high share of food products in the consumption basket, inflationary pressures on food products cannot be ignored. Furthermore, the general public understands inflation more in terms of food inflation than in terms of other components of overall inflation.

“Therefore, we cannot and should not become complacent just because core inflation has come down significantly,” Das said.

Second, and equally important, high food inflation negatively affects household inflation expectations, which has a significant impact on the future trajectory of inflation, he added. The rate-setting Monetary Policy Committee (MPC) has kept the repo rate at 6.50 percent for its last 10 consecutive meetings to stem inflationary pressures. The next political meeting is scheduled for December.

Possibility that Trump imposes tariffs on imports

At the same time, the CEA noted that India had a bilateral trade surplus with the United States, both in goods and services.

Responding to a question about the possibility of tariffs being imposed under the Trump regime, he said: “So there might be pressure… in some areas it will be beneficial and in others we may have to -necessarily reduce certain rights. to become competitive.

“So, I don’t think there is any need to assume that this will be negative for India… If global export growth itself is going to be a challenge, then exports, per se, will not necessarily be the most effective growth engine for India.

The Trump presidency could also prove very helpful in keeping energy prices affordable from the Indian perspective.

“And we need it to be able to develop, obtain resources to finance our energy transition, invest in new technologies, R&D, etc… So, in this sense, the positives could end up outweighing the negatives “, declared the CEA.