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Piyush Goyal says RBI should definitely cut interest rates; central bank's governor responds
Piyush Goyal
Projecting that inflation will come down by December, Piyush Goyal said RBI must cut interest rates. File photo by Ministry of Commerce and Industry via Wikimedia Commons

Piyush Goyal says RBI should definitely cut interest rates; central bank's governor responds

| @indiablooms | 14 Nov 2024, 02:38 pm

New Delhi/IBNS: Union Commerce Minister Piyush Goyal advocated for an interest rate cut by the Reserve Bank of India (RBI) on Thursday (Nov. 14), emphasizing that food inflation should not be a determining factor in rate decisions. 

Speaking at the CNBC-TV18 Global Leadership Summit in New Delhi, Goyal clarified that this was his personal opinion and not an official government stance.

He projected a decline in inflation by December, stating, “Under the Modi government, inflation has been at its lowest since India’s independence.”

Addressing the recent Foreign Institutional Investor (FII) outflows, Goyal encouraged investors to adopt a long-term perspective instead of focusing on short-term fluctuations.

India’s retail inflation hit a 14-month peak in October, primarily due to surging vegetable prices, with annual inflation reaching 6.21 percent. 

This figure surpassed the RBI's target range of 2 percent–6 percent for the first time in over a year. 
Food inflation, which makes up almost half of the consumer price index, rose sharply to 10.87 percent in October from 9.24 percent in September.
The RBI aims to maintain inflation around a medium-term target of 4 percent, balancing economic stability and growth.
 
RBI governor Shaktikanta Das responds to Goyal's call
 
Responding to Piyush GoyalResponding to Piyush Goyal's call for cutting interest rates, RBI governor said he will reserve his comments for December MPC. File photo by Ministry of Information & Broadcasting via Wikimedia Commons
 
Responding to Piyush Goyal's call for cutting interest rates, RBI governor Shaktikanta Das quipped that he will "reserve" his comments for the upcoming monetary policy next month (December).
 
Das said this while speaking at the same event.

In his keynote speech, the RBI governor highlighted the delicate balance central bankers face between "acting too late or too little on one side, and doing too much or too soon on the other."

Das noted that in October, the Monetary Policy Committee (MPC) shifted its stance to 'neutral,' allowing the RBI greater flexibility to consider a rate cut. 

Although the committee left the repo rate steady at 6.5 percent, it moved from a ‘withdrawal of accommodation’ stance to a more neutral approach.
 
When asked about Commerce Minister Piyush Goyal's suggestion for a rate cut, Das responded with a smile, saying, “The next Monetary Policy meeting is in the first week of December, and I’ll hold off on commenting until then.”
Hopes for a rate cut in December have dimmed, however, as India’s October inflation exceeded the RBI's 6-percent upper limit. 
 
CPI inflation rose to a 14-month high of 6.2 percent, leading to concerns that the RBI may hold rates steady for the eleventh consecutive meeting in December.

 

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