NEW DELHI, July 8: RBI’s monetary policy committee member Ashima Goyal has said the Prime Minister Narendra Modi led-NDA Government in its third term should focus on raising farm productivity and improving supply chain to reduce volatility in food prices.
Goyal further said the prospects for robust growth and falling inflation continue with the return of a stable conservative Government that will allow coordination of monetary and fiscal policy in the best interests of the country.
“Since the economy is doing well, continuity is very important. Feasible reforms that improve the supply-side and build on technology and youth advantage are required,” she told PTI.
Goyal emphasised that capacity needs to expand in health, education, environment, courts, policing as well as in infrastructure.
“Rising agricultural productivity and strong supply chains are necessary to reduce volatility in food prices,” she said, adding that many of these require good coordination with the states.
Replying to a question on retail inflation, Goyal said policy has delivered on both low inflation and a robust growth recovery in the past few years partly because it did not allow real interest rates to deviate from equilibrium levels.
“In my view nominal rates therefore need to fall with inflation to prevent real rates rising.
“The majority view (RBI MPC members) wants to wait and watch for longer to ensure inflation is falling sustainably,” she said.
Retail inflation was 4.75 per cent in May .
The RBI, which has been mandated to ensure inflation remains at 4 per cent (with margin of 2 per cent on either side), mainly factors in CPI while arriving at its monetary policy.
On a question concerning the correlation between coalition governments and economic reforms, she said political stability does enable a government to take a long-term view and therefore gives better results over time.
“But a stable coalition can be equally effective,” she said, adding that the recent elections and the smooth formation of a well-functioning coalition point to the deep roots of Indian democracy.
She pointed out that the two chief ministers (N Chandrababu Naidu and Nitish Kumar) in the current NDA coalition are committed to development, which aligns well with the primary objective of the NDA government as Naidu’s TDP won the election on a development plank contrasted with the populism of the opposition.
“The partnership will also increase the secular credentials of the NDA government,” she argued.
With support from N Chandrababu Naidu’s TDP and Nitish Kumar’s JD(U), which won 16 and 12 seats in Andhra Pradesh and Bihar, respectively, and other alliance partners, the NDA has crossed the halfway mark to form the Government at the Centre. (PTI)
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