The Indian government and the central bank are taking steps to control inflation, Finance Minister Nirmala Sitharaman said on Monday, as retail prices have again risen above comfort levels.
Among other moves, the government has increased the import of edible oil as required to rein in inflation and provided free grains to the poor since the COVID-19 pandemic, and would "continuously monitor prices," Ms. Sitharaman said at a post-budget industry interaction in Jaipur.
India's annual retail inflation rate rose above the Reserve Bank of India's (RBI) upper tolerance band for the first time in three months to 6.52% in January, as prices rose for food products such as cereals and wheat. RBI has targeted keeping inflation between 2%-6%. The RBI will take necessary steps to manage inflation within "expected limits," said Ms. Sitharaman.
Economists have said the soaring prices of cereals such as wheat and rice were a concern for the Indian economy even though the January inflation data may have overstated the extent of the increase.
Some Asian and western countries that have been providing subsidised food and energy since the pandemic started, calculate consumer price index-based inflation using a weighted average of a segment of the population that pays market price for such items and those who don't, said Chief Economic Adviser V. Anantha Nageswaran.
Since India does not do that, the "stated increase in grains price is not exactly what all consumers bear, therefore stated inflation rate overstates the underlying inflation rate," he said.
In its last monetary policy decision on February 8, RBI raised its key rates by 25 basis points.