New inflation target could be announced in Budget 2020-21
NEW DELHI: The government is considering a proposal to raise the consumer price index (Cpi)-based inflation target under the monetary policy framework by a notch to 5% with a tolerance level of plus and minus 2% from April 1 to give more leeway to the Reserve Bank of India (RBI) to cut policy rates and boost growth in the pandemic-ravaged economy.
The proposal will come with expected fiscal measures in the Budget to revive growth, two persons aware of the development said.
A final decision on the proposal to raise the retail inflation target is still awaited as some experts in the government and at the central bank prefer status quo. But some of them also think that it is time to take robust fiscal and monetary measures to revive growth, the two persons said. The government in 2016 notified 4% CPI inflation as the target from August 5, 2016, to March 31, 2021, with an upper tolerance limit of 6% and the lower tolerance limit of 2%.
As per the RBI Act, 1934, the government, in consultation with RBI, has to finalise the target for the next five years and get it passed by Parliament, one of the two persons said. “We expect a consensus to emerge soon as the government intends to get it passed in the current Budget session,” he added.
NEW DELHI: The government is planning to launch the Consumer Expenditure Survey (CES) with a revised methodology for FY22, after the previous survey in FY18 was discarded citing data quality issues.
The CES data is used to calculate poverty and inflation levels, as well as to track economic progress in rural and urban India. Pronab Sen, former chief statistician of India, who chaired a committee to revise the methodology for CES, said the survey was originally planned for July 2020, but was delayed due to the covid crisis. “We were planning to launch the next CES in the current financial year. The pilot survey started in February. The thought was to launch the survey in July 2020. That’s out of question. Let’s see if we could launch it in July 2021.” “The whole problem with the CES was that it is too long. And the net result was that all the items other than food, the quality of data was poor because people were tired by the time they got to that. We decided to see whether we could split the questionnaire in three parts, canvass them separately and stitch them together.
It requires three visits to the household. We did the first visit, then the lockdown happened. This will be the basis of the next CES if the pilot works out,” he added. But, can FY22 be considered as a normal year for conducting the survey, given that it will be just a year after the economy contracted at a record rate? Sen said both FY21 and FY22 could not be considered normal. “And, how long can we delay it? Remember the current base year (FY12) is 10 years old. If we conduct it next year, you will get the results in January 2023, which means that the base revision can only happen in FY24,” he added.