‘It is also important to consider food inflation while deciding the policy interest rate’- Raghuram Rajan

New Delhi| Former Reserve Bank of India (RBI) Governor Raghuram Rajan said he does not agree with keeping food price rises out of core inflation. He says that doing this will weaken people’s trust in the central bank, because it has been given the responsibility of controlling inflation. Rajan said that inflation needs to focus on the goods and services that people use in everyday life. Consumer sentiment depends on inflation data.

He said, even when I became the Governor, we were focusing on PPI (Producer Price Index). But this has nothing to do with the challenges faced by an average consumer. Former RBI Governor said, in such a situation when RBI says that inflation is low then look at PPI. If consumers are facing different challenges then they do not really believe that inflation has come down.

Chief Economic Adviser at the Economic Review 2023-24 V. Ananth Nageswaran had advocated keeping food inflation out of the process of policy rate determination. He had said that monetary policy has no impact on the prices of food items as prices are determined by supply side pressures. Rajan, currently a finance professor at the US-based Chicago booth, said on this argument, you cannot influence food prices in the short term but if food prices remain high for a long time then it means that there are some restrictions on food production relative to demand. Are. This means that to balance it you have to reduce inflation in other areas.

On several recent allegations against market regulator SEBI chief Madhabi Puri Buch, the former RBI Governor said that one has to be cautious about this because anyone can make allegations at any time. But if there is adequate investigation into the allegations, it is very important for the regulator to be beyond all allegations, he said. This means that he has to address the allegations point by point.

Terming the allegations against the SEBI chief as a case of conflict of interest, Rajan said the more detailed the investigation into the allegations is, the more detailed the point-wise response should be. “Finally, I think it’s important for our regulator to be as reliable as possible”, he said. Last month, Madhabi and her husband Dhawal Butch had refuted allegations of inappropriate behavior and conflict of interest made by Hindenburg Research and Congress, saying they were false, malicious and motivated.