Debating India's Inflation Metrics: Beyond Food Prices

RBI's Nagesh Kumar suggests adopting two inflation rates, one including and one excluding food prices, for effective policy making. Current consumer price inflation emphasizes food heavily. While economic growth slowed, it is expected to recover. Private investment may rise if uncertainties ease post-elections.

The debate over India's inflation metrics is heating up with RBI's Monetary Policy Committee member, Nagesh Kumar, suggesting that India adopt two separate inflation rates. One would include food prices, while the other would not, thereby allowing for more nuanced policy-making strategies.

Currently, food prices heavily influence India's consumer price index. Chief Economic Advisor V Anantha Nageswaran recommends excluding food inflation from monetary policy decisions, arguing that these prices are primarily driven by supply-side issues. This debate gains momentum amid a need to revisit the weightage of food prices, last set in 2011-12.

Despite a slowdown in economic growth to a seven-quarter low, Nagesh Kumar remains optimistic about recovery. He anticipates a surge in private investment as electoral uncertainties clear, expecting robust growth in future quarters, bolstered by public investment initiatives.

(With inputs from agencies.)