NEW DELHI: With food prices being a key driver of inflation, RBI has intensified its interaction with government agencies, especially the department of consumer affairs at the Centre, to get a better grip over the issues.
During last few months, at least two rounds of interactions between the two agencies have taken place – once at RBI’s Mint Road office in Mumbai and another in Krishi Bhawan, where the government’s assessment of the price situation has been shared.
While central bank sources said that interactions have been taking place, government sources indicated that the level of engagement has gone up. Typically, RBI is seen to be interacting more with the finance ministry – especially the department of economic affairs.
Inputs from the food and consumer affairs ministry are seen to be crucial as the department of food deals with procurement and also handles the Food Corporation of India (FCI), the agency dealing with the accumulation, storage and movement of stocks. The consumer affairs department has been at the forefront of managing food prices – be it ensuring onion traders in Nashik or exporters of tur daal in Myanmar deliver supplies and don’t play the markets.
In recent months, inflation has been driven by food prices, especially commodities such as vegetables, pulses, cereals, milk and milk products. In August, food inflation moderated to just under 10% from over 11.5% in the previous months, while overall inflation cooled from 7.4% to 6.8% during this period.
Several economists have argued that the government needs to reduce the weight of food in the overall inflation basket to get a better gauge of price movement in the economy. More interaction between RBI and wings of government other than just the finance ministry also follow active approach taken by group of ministers, which has been working with several ministries – from finance, food and consumer affairs to agriculture and commerce – to ensure that inflation remains within comfort zone, especially in run-up to crucial elections.
