Piyush Goyal wants RBI to cut interest rates. Shaktikanta Das responds

Union Minister of Commerce and Industry Piyush Goyal shared his opinion that food price inflation should not play a role in the Reserve Bank of India’s (RBI) interest rate decisions.
Speaking at a CNBC-TV18 event in Mumbai, Goyal described the link between food inflation and interest rates as an “absolutely flawed theory.”
Goyal criticised the inclusion of food inflation as a factor in interest rate decisions, explaining that food inflation is largely a result of supply and demand rather than a monetary issue.
“I think it’s an absolutely flawed theory that food inflation should be considered while deciding on the interest rate structure. It (food inflation) has nothing whatsoever to do with managing inflation. That’s a demand-supply situation,” said Goyal.
However, he clarified that his comments are his personal views and do not reflect the stance of the government.
Goyal suggested that policymakers and regulators should engage in discussions involving all stakeholders, including economists from outside the RBI, to determine if food inflation should be part of the decision-making process for inflation targets and interest rates.
According to him, the factors driving food inflation differ from those affecting core inflation and thus require different strategies for management.
RBI Governor Shaktikanta Das had earlier warned that inflation risks could rise due to factors like food prices, indicating that a rate cut should not be assumed.
During the event, RBI Governor Shaktikanta Das, who spoke after Goyal, reiterated the importance of managing inflation, highlighting several risks that could impact economic growth and price stability.
Shortly after Union Minister Piyush Goyal on Thursday suggested that the RBI should consider cutting interest rates, Governor Shaktikanta Das responded that he would “reserve” his remarks until the December monetary policy review.
When asked specifically about Goyal’s recommendation to reduce the repo rate, Shaktikanta Das, with a smile, replied, “The next Monetary Policy is coming up in the first week of December. I would like to reserve my comments for that. Thank you.”
He said, “A soft landing has been ensured, but risks of inflation coming back and growth slowing down remain.”
Shaktikanta Das pointed to challenges from global conflicts, fluctuations in commodity prices, and climate change, which continue to put pressure on inflation. Despite Goyal’s comments, Das refrained from addressing them directly and focused instead on broader inflationary pressures.
In his address, Das highlighted India’s economic resilience, citing strong growth and the ability to withstand external pressures. “India’s economic growth remains resilient; inflation is expected to moderate despite periodic humps, and the external sector is robust,” he said.
He acknowledged that the economy has faced prolonged turbulence, and yet India continues to demonstrate resilience in the face of new challenges. Das credited this resilience to efforts by both RBI and the government to keep inflation in check, including initiatives aimed at reducing food prices.