Ahead of monetary policy review on January 29, RBI Governor D Subbarao on Saturday spoke of poverty and high food inflation in remarks interpreted as dashing hopes of a rate cut later this month.
He said lower segments of the society, which spend a greater proportion of their budgets on food, were more concerned about high food inflation.
“We need to improve our understanding of the poor and poverty,” Mr. Subbarao said in his introductory remarks at the first ‘Suresh Tendulkar Memorial Lecture’ here.
RBI has kept key interest rates unchanged since April, 2012 on inflation concerns. In its last policy review, RBI, however, hinted at lowering interest rates in this month’s review.
Earlier this week, the RBI Governor had said in Uttar Pradesh that fighting inflation is the top priority for the central bank.
Prices of almost every commodity, especially edibles and clothes, had registered an increase and inflation had affected every section of the society, particularly the poor, he had said. This remark had dampened hopes of a rate cut later this month in RBI’s quarterly monetary policy review.
Inflation based on wholesale prices declined to a three-year low of 7.18 per cent in December, but it failed to provide relief to consumers as retail prices rose to cross the double-digit mark in the same month.
Food inflation, as a category, stood at 11.16 per cent in December against 8.50 per cent in the previous month. Food articles have 14.3 per cent share in the WPI basket.
Mr. Subbarao praised late economist Suresh Tendulkar’s study of poverty and estimation of people below poverty line (BPL) which displayed his “sensitivity and empiricism” on the issue.
Noted economist Abhijit Banerjee, currently Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology, delivered the lecture on the topic, ‘Identifying the Poor’.