Core inflation with non-volatile food must guide RBI: Virmani

The Reserve Bank of India (RBI) should consider looking at core inflation, re-defined with the inclusion of non-volatile food items, for its monetary policy decisions, Arvind Virmani, member, Niti Aayog said.

- PRIYANSH VERMA

However, volatile elements of food being "beyond its control," could be kept outside its inflation targeting framework, the noted economist said.

"If 80% of the CPI basket has non-volatile elements—which includes food items too—that should be considered as core index, and should be looked at for RBI's monetary policy decisions," he said.

Earlier, the Economic Survey for 2023-24 had proposed exclusion of food from the RBI's inflation-targeting regime, and senior government functionaries, including commerce and industry minister Piyush Goyal have backed it.

Typically, core inflation constitutes non-food and non-fuel items; and in the current CPI series, with base 2012, carries a weight of around 48%. However, if non-volatile items from food are also included in the core basket, then its weight would increase to around 85%.

From the perspective of monetary policy decisions, core inflation should be tracked and considered by the RBI and not the entire Consumer Price Index (CPI), Virmani said.