Raghuram Rajan opposes excluding food inflation in setting interest rates

Amid suggestions for excluding food inflation while setting benchmark interest rates, former RBI Governor Raghuram Rajan has said that he is against excluding food prices from headline inflation, as it would erode the 'great faith' of people in the central bank, which has been mandated by the government to keep inflation in check.

Rajan further said it is best that inflation target a basket which is what the consumer consumes because that affects the consumers perception of inflation and ultimately inflationary expectations.

"When I came into office, we were still targeting PPI (producer price index). Now that has no bearing to what the average consumer faces.

"So, when the RBI says inflation is low, look at PPI, but if the consumer is facing something very different, then they do not really believe that inflation is down," he told PTI.

Rajan was responding to a question on suggestions made in the Economic Survey 2023-24 for excluding food inflation while setting benchmark interest