Budget proposals won’t stoke inflation, says Das

New Delhi, February 15

RBI Governor Shaktikanta Das on Saturday said the Budget proposals would not have much inflationary impact as the government had by and large remained within the fiscal deficit road map set under the FRBM Act. The Union Budget earlier this month raised the fiscal deficit target to 3.8 per cent of the GDP for 2019-20, from the 3.3 per cent pegged earlier, due to revenue shortage.

“The direct inflationary impact of any Budget is fiscal deficit number, when borrowing goes up, but the government has adhered to the principle of fiscal prudence. The ‘escape clause’ under the FRBM Act, the deficit number in the current year as well as the next year are very much within the parameters set as per FRBM committee recommendations,” Das said.

He was talking to the media after the customary address of the Finance Minister to the RBI central board post Budget. “The key reason for rise in inflation is because of food inflation, mostly milk, fish and various protein-related items. Core inflation has slightly edged up because of revision of telecom tariffs,” he said.

Retail inflation based on the consumer price index (CPI) soared to a near six-year high of 7.59 per cent in January, surpassing the RBI’s comfort range, primarily on account of rising vegetable and food prices. This was the highest rate of inflation since May 2014, when it came in at 8.33 per cent.

On inclusion of core inflation in the monetary policy framework, Das said, “Already an internal review process is on. At the appropriate time, if required, we will have a discussion with the government.” Asked if the board considered payment of interim dividend to the government, the Governor was non-committal. “We are uploading minutes of RBI’s central board meeting. If any decision is taken, it will be uploaded on the website,” he replied.

On moderating credit growth, Das said there were signs of uptick and the momentum was gathering pace. Speaking on alignment of RBI’s accounting year with financial year, Das said, “It is under consideration.” — PTI

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