In order to combat inflation, Nirmala Sitharaman has an obsession with using interest rates


Nirmala Sitharman, the minister of finance, stated on Friday that the government's top objective is to control inflation, but she added that increasing interest rates is not the only way to do so. She spoke at the B20 Summit in India, which the Confederation of Indian Industry (CII) is hosting.

"Obsession to use interest rates as the only tool to deal with inflation and not manage the supply side factors will not give a complete solution," Nirmala Sitharaman declared.

"Central banks will have to keep in mind growth and growth-related priorities along with controlling inflation," Sitharaman continued.

She continued by stating that high-interest rates could impede an economic rebound.

Her remark comes at a time when India's retail inflation is anticipated to increase soon. Retail inflation in the nation rose to 7.4% in July, a 15-month high, mostly due to increases in the cost of vegetables and cereal.

The government has had to take some extreme actions as a result of recent increases in inflation, including subsidizing the price of tomatoes and onions, releasing market stocks of sugar and wheat to lower prices, and even raising export customs.

Despite its efforts, food costs are still high this month, and things should start getting better by the end of August.

Despite growing inflation, the Reserve Bank of India chose to maintain the benchmark lending rate. Instead, a temporary reduction in the amount of cash in the banking system was announced by the central bank.

After an aggressive rate hike cycle that resulted in a 250 basis point increase in the key repo rate, it should be highlighted that the central bank has abstained from raising lending rates in its most recent policy reviews. 

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