Core CPI inflation still high but govt wants RBI to cut interest rate

Seeking to keep food prices under check, the government has renewed its call to states that they amend their APMC Act and join e-market in agriculture.

“Will have to address the supply chain issues to ensure good prices to farmers. States should amend the APMC Act and join national e-market in agriculture,” Economic Affairs Secretary Shaktikant Das said.

The emarket platform was launched by Prime Minister Narendra Modi earlier this year seeks to give farmers the right to decide on when and where and at what price they should sell their produce without involvement of the middleman. The August retail price inflation, which cooled to a five-month low at 5.05%, has also given the government a renewed hope that the RBI will cut interest rates sooner than later.

But, analysts are divided over whether the RBI will really oblige the government until the core consumer price inflation comes under control.

The core CPI in August remained almost unchanged at around 4.7% in August from around 4.6%  in July. It the core inflation that represents the long run trend in the price level. The RBI looks at it closely to gauge price pressure related to demand in the economy. Core excludes food and fuel, which is subject to volatile prices.

Das also said, “inflation rate and RBI policy rate are usually linked. When inflation comes down, it is for RBI to take the call”. But the official data shows, the core inflation is on the rise for the past three months.