The National Rural Employment Guarantee scheme is not quite the cause of inflation, Dr Subir Gokarn, Deputy Governor, Reserve Bank of India, said today.

Talking to journalists at the Madras School of Economics, after delivering the 5{+t}{+h} SAGE-MSE Endowment Lecture, organised jointly by the Madras School of Economics and SAGE Publications, Dr Gokarn said that data showed that the rise in rural wages was higher than what could be attributed to NREGS.

He said that while the scheme could have contributed to inflation build up, there was no evidence to show that it was the cause of inflation. Dr Gokarn was replying to a question as to whether the persistent food inflation was due to the employment guarantee scheme and the Food Security Bill.

On Food Security Bill, Dr Gokarn said that the bill was yet to be passed into Act, and as such no comment could be offered on its impact. However, inasmuch as the Bill envisages distribution of cereals, it may not have much impact, because the food inflation of today has not been caused by any rise in prices of cereals (wheat and rice), he said.

Dr Gokarn was guarded in answering questions on whether the Reserve Bank would cut interest rates, or whether the fall in inflation was to a level enough for a rate cut. He said that the RBI had only said that the conditions for raising interest rates were not there. He said that RBI would first like to see a “steady, sustained move-down” in inflation before taking a call.

Earlier, in his lecture, he said that although inflation had come down, inflation expectations were still high.

>mramesh@thehindu.co.in

Related Topics