RBI Member Suggests Dual Inflation Rates

In a groundbreaking suggestion, Nagesh Kumar, a member of the RBI's monetary policy committee, has proposed the establishment of two distinct inflation rates. This innovative approach aims to refine policy making by considering both overall inflation and inflation excluding food prices, which are significantly influenced by seasonal demand and supply mismatches.

Chief economic adviser V Anantha Nageswaran, in the Economic Survey 2023-24, supported the idea of excluding food inflation from rate setting decisions. He argued that monetary policy has minimal impact on food prices, which are primarily driven by supply-side factors.

The current weightage of food in the overall consumer price inflation, set at 46% in 2011-12, is under scrutiny. Kumar emphasized the need for a reevaluation to better reflect the economic realities of today.