Just a day ahead of the release of January headline inflation data, Reserve Bank of India (RBI) Governor Raghuram Rajan called for moderation in the Minimum Support Prices (MSP) for agricultural products to help curb inflation in the country- something which has been a top priority of India’s central bank.
The governor highlighted that MSP prices would provide a baseline level of support when the farmer is in difficulty-without displacing market prices. He added that any "inadequate" or "inappropriate" price adjustments in these areas mean that the apex bank has to bear a bigger burden to combat inflation.
Further, Raghuram appreciated the government for its efforts to revive growth, narrow the current account deficit, and meet fiscal targets and pressed upon the need to continue to stay on the path of fiscal consolidation measures. "It is very important that we spend money on needed public investment, even while reducing misdirected subsidies and entitlements", Rajan said.
RBI governor Raghuram Rajan has also batted for reduced expenditure on subsidies and higher energy prices, which would also lead to lower inflation over the medium term. According to the Reserve Bank governor, higher energy prices will reduce excessive consumption, reduce subsidies and fiscal deficits, and incentivize investments and competition, even while allowing prices to be determined by an increasingly stable and plentifully supplied global market for energy.
The annual rate of inflation, based on the consumer prices index (CPI) for month of January, 2014 eased more than expected to a 24-month low of 8.79% as against 9.87% in December, but was still higher than Reserve Bank's medium term comfort zone.
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