Budget 2020 Expectations: Monetary Policy Framework may change
Government may adopt WPI to measure inflation doing away with the practice of taking retail inflation data. It is aggressively working on Monetary policy frame work, too. Measures to control inflation and boosting growth could be announced in Budget 2020
Government may adopt WPI to measure inflation doing away with the practice of taking retail inflation data. It is aggressively working on
Monetary policy frame work, too. Measures to control inflation and boosting growth could be announced in Budget 2020.
Consumer price index (CPI) or retail inflation rose up to 7.35% in December. This rise is highest in five-and-half-years. The Reserve Bank
of India had kept the inflation rate target at 4%. The rise in CPI is primarily due to the rise in prices of the food items.
If we talk about the WPI or the Wholesale Price Index, it is also at its peak of 2.75% for the last seven months. The WPI in November
was just 0.5%.
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To control the situation, the government has swung into action. It is planning to take many big steps to bring the inflation down.
According to Zee Business' sources in the Finance Ministry, the government is not too worried about the rising inflation as it thinks that the
rise is temporary.
Apart from working towards controlling inflation, the government is also working on increasing economic growth rate - GDP growth. The
government has held several rounds of discussions on the monetary policy framework.
Former Finance Minister Arun Jaitley had begun work on the monetary policy framework with the former RBI Governor Raghuram Rajan
but this framework did not give the desired results.
Sources tell Zee Business that the government is very serious about the monetary policy framework for the Budget 2020. The government
is simultaneously working on the micro economic framework.
Sources say that till now the government has been considering price rise in terms of retail inflation and it wants the RBI to measure
inflation in the monetary policy in terms of the WPI. The reason behind such a move is that the government thinks that a lot of things are
left out because of the retail inflation approach. This has been the reason why inflation has been rising dramatically. The government
thinks that the right inflation target could be achieved through the WPI approach.