Raghuram Rajan: Importance of Including Food Prices in Inflation Metrics

Former RBI Governor Raghuram Rajan argues against excluding food prices from headline inflation, stating it would erode public trust in the central bank. He contends that inflation should reflect the consumer experience, influencing their perceptions and expectations. Rajan addresses criticisms of SEBI and supports lateral entry in government services.

Former RBI Governor Raghuram Rajan has voiced his opposition to excluding food prices from headline inflation metrics, emphasizing that such a move could erode public trust in the central bank. Rajan highlighted the significance of using a basket that reflects consumer consumption to accurately gauge and manage inflation.

Responding to suggestions in the Economic Survey 2023-24, Rajan argued that while food prices might be influenced by supply-side factors, it is crucial for the RBI to target the overall price level. He also noted that the current weightage of food in consumer price inflation, established in 2011-12, needs a review.

Additionally, Rajan commented on multiple allegations against SEBI chief Madhabi Puri Buch and supported the idea of lateral entries in bureaucracy, provided that it respects existing employees' incentives. He emphasized the need for regulators to maintain credibility to benefit national interests and markets.

(With inputs from agencies.)