Monetary policy hostage to vegetable prices: PM’s advisory council member

20 Dec 2022

Opinion: Poonam Gupta;

NCAER chief Poonam Gupta moots mechanisms to stabilise prices, buffer economy from shocks

India’s economic growth is likely to be subdued in the coming year, but inflation will also subside partly due to monetary policy effects and partly due to base effects, Prime Minister’s Economic Advisory Council member Poonam Gupta said on Monday, mooting steps to buffer the economy from recurrent shocks like high inflation, oil prices or capital outflows.

Noting that no country will have monetary or fiscal policy space to stimulate growth in the coming year, Ms. Gupta, who is the director general of the National Council for Applied Economic Research, said global growth would slow down as predicted by most agencies.

India’s inflation acceleration to close to 7% this year has been mainly driven by high vegetable prices, which is a domestic issue and not an ‘external’ one, she said.

“It is really sad in a way that our monetary policy is held hostage by vegetable prices. And monetary policy is a blunt instrument to address that kind of inflation,” Ms. Gupta underlined, suggesting price ‘stabilisation’ efforts to balance domestic demand and supply issues for vegetables.

“Surely, our economy, which is more than $3 trillion, can manage its vegetable prices better than it has. These shocks, which hold the policymakers’ attention unduly, I would say… can be addressed better. And it is time that we address them better so as to focus on bigger things, which is generating more employment, manufacturing output and exports,” she concluded at a discussion on the upcoming Union Budget hosted by the Ananta Centre

“The Indian economy is very well coupled with the global economy for a number of reasons… If the global demand for goods slows down, exports from India slow down,” she said, noting that most forecasters are projecting a growth of around 6% in 2023-24 for India. “It could be a little lower, it could be a little higher.”

Published in: The Hindu, 20 Dec 2022