 "Prime Minister Narendra Modi gestures to Reserve Bank of India (RBI) Governor Raghuram Rajan at an event on financial inclusion in Mumbai. Photo: Reuters")
Dispelling fears that GST will fuel inflation, Prime Minister Narendra Modi on Monday said the government and the Reserve Bank have agreed to maintain an inflation target of four per cent.
He said the target has been set by a legislation and it would be incumbent on the RBI as well as the officials to see that inflation remains at 4 per cent with a margin of plus or minus two per cent.
Intervening in a debate on Constitution (122nd Amendment) Bill in Lok Sabha, Modi said there has been continuous discussions over growth and inflation.
There is also a perception that the government and RBI have differences over the issue of inflation and growth, he said, adding the government by law has fixed an inflation target.
Prime Minister's remarks, ahead of RBI monetary policy tomorrow, also comes against the backdrop of alleged differences between the government and outgoing RBI Governor Raghuram Rajan. It would also be the last policy of Rajan.
Consumer Price Index-based retail inflation rose 5.77 per cent in June, the fastest pace in 22 months and it is expected that the implementation of the new Goods and Services Tax (GST) may push it up further.
While stating that there have been concerns about revenue and fiscal deficit, Modi said the FRBM (Fiscal Responsibility and Budget Management) Act enables financial discipline and ensure a "balanced approach" in ensuring positive change in the economy of states.
It has also helped in improving the financial health of the states, he added.
