Consider removing food from inflation-targeting framework, Economic Survey tells government
Hardships caused to low-income citizens by food price rise could be handled through direct benefit transfers or coupons, the document said.
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The Economic Survey for 2023-’24, presented in the Lok Sabha on Monday, said it was “worth exploring” if the country’s framework to target price rise should exclude food inflation.
The Reserve Bank of India is tasked with keeping inflation at 4%, with a tolerance band between 2% and 6%. In recent years, volatile food and vegetable prices have led to frequent inflation spikes.
The Economic Survey noted that in developing countries, food constitutes a very high portion of the consumer price index, which is the basis for measuring inflation. Due to this, it argued, when central banks in such countries want to rein in headline inflation, they urge the government to control food price rise.
“That prevents farmers from benefiting from the rise in terms of trade in their favour,” the Economic Survey said.
The document said that in view of this, India’s inflation-targeting framework “should consider targeting inflation, excluding food”. It said that hardships caused to low-income citizens by food price rise could be “handled through direct benefit transfers or coupons for specified purchases valid for appropriate durations”.
The Economic Survey, tabled by Finance Minister Nirmala Sitharaman in Parliament a day ahead of the Union Budget for 2024-’25, details the state of the country’s economy.
India’s retail inflation increased to 5.08% in June, the highest...
