RBI Working On CPI Weightage Discussion Paper, To Release Soon
This has come as there has been a debate since last year over whether food inflation should be included in the RBI's inflation targeting framework.
The Reserve Bank of India is preparing a discussion paper on the weightage of food prices in the consumer price index and will release it for public consultation, Governor Sanjay Malhotra said at the post policy press conference.
"Our target is certainly the headline inflation and the FIT (flexible inflation targeting) is due for a review as we do it every five years. There is a discussion paper which we are preparing and we will open that up for public consultation," he said while answering to a query.
While the final view has to be taken by the government, the RBI will give its view to the government and should move ahead in this regard, Malhotra said.
This has come as there has been a debate since last year over whether food inflation should be included in the RBI's inflation targeting framework.
In 2016, the RBI had decided to target headline inflation, which includes food. However, recent developments have brought this decision into question.
Historically, food has been a dominant component of CPI in India. In CPI basket, food and beverages currently constitute 45.86% of the total weight, according to the Ministry of Statistics and Programme Implementation.
In June, India's retail inflation fell to its lowest since January 2019 at 2.1%, from 2.82% in May, according to data from the ministry. Food CPI declined by 1.1% in June, marking the first contraction in the index since February 2019.
Previously Finance Minister Nirmala Sitharaman had also echoed the need for broader discussions on inflation and interest rate dynamics.
RBI's Monetary Policy Committee kept the benchmark policy repo rate unchanged at 5.5%, in-line with economists' expectations and also maintained its 'neutral' stance.
However, it lowered its inflation forecast to 3.1% for the current financial year from 3.7%. It expects inflation to be 2.1% in the second quarter, 3.1% in the third quarter, and 4.4% in the fourth quarter, Malhotra said. MPC has also projected the inflation for the first quarter of FY27 at 6.60%.
