Amid the fears that Goods and Services Tax (GST) will increase inflation, Prime Minister Narendra Modi has said that the Reserve Bank of India (RBI) and government has agreed to maintain an inflation target of 4%. He added that as the target has been set by legislation it would be incumbent on the RBI as well as the officials to see that inflation remains at 4% with a margin of plus or minus 2%.
Interceding in debate on Constitution (122nd Amendment) Bill in Lok Sabha, Modi said there has been continuous discussions over growth and inflation and there is also a perception that the government and RBI have differences over the issue of inflation and growth, adding the government by law has fixed an inflation target.
Prime Minister further said Consumer Price Index-based retail inflation rose 5.77% in June, the fastest pace in 22 months and it is expected that the implementation of the new GST my push it further. While there have been concerns about revenue and fiscal deficit, the Fiscal Responsibility and Budget Management (FRBM) Act enables financial discipline and ensure a ‘balanced approach’ in ensuring positive change in the economy of states. He added that it has also helped in improving the financial health of the states.