Taming inflation key to growth: FM

Sitharaman says green shoots of private capex upcycle can be felt now

- RUCHIKA CHITRAVANSHI

Finance Minister (FM) Nirmala Sitharaman on Friday said taming inflation was absolutely critical to economic growth, stressing that an over-reliance on interest rates as the only tool to fight the price rise, without managing the supply side factors, would not provide a complete solution.

Speaking at the CII B20 Summit INDIA 2023, Sitharaman said a persistent high inflation would weaken demand, and elevated interest rates for a considerable time could come in the way of economic recovery.

The rate of retail inflation surged to a 15-month high at 7.44 per cent in July on the back of skyrocketing food prices. In its latest monetary policy review, the Reserve Bank of India (RBI) revised upward its inflation forecasts to 6.2 per cent for the September quarter and 5.4 per cent for FY24, while keeping the policy rate unchanged at 6.5 per cent.

The minutes of the August review released on Thursday stated that the monetary policy committee decided to wait and watch the evolution of headline inflation. “The RBI needs to be ready to pre-empt any second-round impact of food price shocks on the broader inflationary pressures and risks to anchoring of inflation expectations,” the minutes quoted RBI Governor Shaktikanta Das as saying.