Former Reserve Bank Governor Raghuram Rajan addressed this issue in a speech in 2014, noting, "They say the real problem is food inflation, how do you expect to bring it down through the policy rate?" Rajan's remarks highlighted the persistent challenge central banks face in balancing the need for price stability with the complexities of food-driven inflation, often beyond the immediate influence of monetary policy.
The topic resurfaced in the latest Economic Survey when the chief economist to the Centre, in the chapter 'Medium-term outlook: A growth vision for new India', called for re-examining the RBI's inflation-targeting framework, suggesting food be excluded.
The chief economist argued food inflation is largely driven by supply-side factors such as the unpredictability of monsoons, crop failures, and government-set minimum support prices. The RBI's monetary policy tools, designed to combat inflationary pressures stemming from excess aggregate demand, may prove counterproductive in addressing supply-driven inflation.
However, RBI authors Michael Debabrata Patra, Joice John and Asish Thomas George, in the latest RBI Bulletin released on August 19, have countered this. They demonstrate that food inflation significantly and positively influences inflationary expectations. As inflationary expectations drift away from the central bank's target and become "unanchored", they undermine the effectiveness of monetary policy.
This story is from the August 27, 2024 edition of The Morning Standard.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the August 27, 2024 edition of The Morning Standard.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
STYLISH SYMPHONY IN SARIS
LEANING gently against the tanpura, her eyes closed, we see a series of photographs of a legend gracefully immersed in her melody.
India win fifth ACT hockey title
A DETERMINED India claimed their fifth Hero Asian Champions Trophy title with a fighting 1-0 victory over hosts China here on Tuesday, completing a display of absolute dominance in the tournament in which they won all their matches.
Expanded CL season and Rodri warning
MANCHESTER City are braced for their Champions League reunion with Inter Milan at the start of an expanded tournament that will be “so tough” for the 2023 winners.
Chasing his red-ball dream, keeper-batter Jaker lands in India
POSTED as a Naik with Bangladesh Army, Showkat Ali of Habiganj district in Sylhet division, Bangladesh was not fond of cricket. Instead, he liked football.
Rahul or Sarfaraz: Middle-order conundrum
Captain Rohit hints at senior batter’s return in the first Test against Bangladesh starting in Chennai on Thursday
Asiad medallist fails dope test, Bajrang's name goes missing
HANGZHOU Asian Games bronze medallist Kiran Baliyan figures among some of the top athletes who have tested positive for banned substances and have been provisionally suspended.
Big boost for women as ICC announces prize pay parity
WITH the ninth edition of the Women's T20 World Cup a few days away, the ICC announced equal prize money for men and women in World Cups.
'B'deshi crisis doesn't have much impact on India trade'
THE recent developments in Bangladesh that have led to the creation of new junta-led government haven't had any significant impact on India's trade so far and going forward, the effect will vary based on industry/ sector-specific nuances and exposure, according to India Inc.
SpiceJet has not paid statutory dues, to use QIP proceeds to clear liabilities
SPICEJET has not paid statutory dues of 427 crore between March 2020 and August 2024, according to the airline's preliminary placement document which was submitted to the BSE on Monday to raise funds.
AI launches refit scheme for 67 aircraft revamp
AIR INDIA has commenced its $400 million refit programme for a phased revamp of 67 legacy aircraft in its fleet.