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Finance Minister Nirmala Sitharaman on Thursday said inflation cannot be tamed by the Centre alone, but jointly with the States. She also highlighted that buying Russian crude is part of inflation management.
“It cannot be that inflation is handled only by the Centre and when states don’t take enough steps, that part of India suffers for want of a relief from stress of inflation,” Sitharaman said during an ICRIER conference on ‘Taming Inflation’.
She also said that if States’ inflation is also to be attributed to the Centre, there is a need to find a way for the Centre and the States to work together to handle inflation. “Just as today there are a lot of discussions about devolution of taxable revenues similarly, there are, I would suggest, enough justifications to have this understanding of how States also manage inflation,” she said.
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Inflation management cannot be left to the monetary policy alone, she saidThe FM’s comments have come at a time when 11 States, including Maharashtra and Gujarat have recorded higher retail inflation based on Consumer Price Index (CPI) than the national average of 6.7 per cent in July. Another important factor is that rural inflation continues to be higher than urban in many of the 22 States and Union Territories.
The number for August will be out on Monday, September 12 and the expectation is that it will be more than 6 per cent which may prompt the Monetary Policy Committee of RBI to go for another rate hike.
Putting a disclaimer that she is not giving any direction to the RBI, Sitharaman said, “The Reserve Bank will have to synchronise. It may not be synchronised as much as developed central banks. I am not prescribing anything to the Reserve Bank, I am not giving any forward direction to the central bank.”
She added, “But it is the truth – India’s solution to handling the economy, part of which is handling inflation also, is an exercise where the fiscal policy together with monetary policy has been at work. It can’t be singularly dependent on the monetary policy, which has proved totally ineffective in many countries.”
Inflation management
Further, she added that India‘s inflation management was “an exercise comprising many activities, most of which are outside the (purview of) monetary policy”.
Commenting on crude buy from Russia, she said that it was part of the country’s inflation-management strategy and that other countries were taking similar steps. “I give credit to the statesmanship of the Prime Minister to make sure that we kept up our relationship with all countries but yet managed to get the Russian fuel, which is what Japan is doing today, which is what some other countries are doing,” she said.
Despite Western pressure, India has not condemned Russia‘s February invasion of Ukraine, instead calling for a diplomatic solution to the crisis and an end to violence. Russia has for decades been India‘s biggest foreign supplier of defence hardware. India‘s crude oil shipments from Russia have jumped to between 12 per cent and 13 per cent of imports from all sources since February from about 2 per cent before then, she said.
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