Advisor's advice.

"India's monetary policy framework should consider targeting inflation that excludes food, the prices of which are influenced more by supply than demand, the government's 2023-24 Economic Survey said." "Annual retail inflation rate rose to 5.08% in June due to a sharp rise in food prices but demand-driven core inflation, which leaves out food and fuel prices, was around 3%." ET.  The Reserve Bank of India (RBI) has a mandate to target consumer price index (CPI) inflation at 4%, with a margin of 2% on either side, till 31 March 2026. ET. 'Core inflation' excludes food and fuel prices because they are too volatile and fluctuate wildly because of variation in supplies. Investopedia. The RBI cannot influence supplies of food and, therefore, should not be responsible for controlling high prices of food. Short term interest rates effect demand-induced rise in prices and is ineffective when prices are driven by supplies. If retail inflation is brought down by low food prices when core inflation is high the RBI will be expected to raise its policy rates, so when core inflation is low and food prices are high policy rates should fall, argued Chief Economic Advisor V Anantha Nageswaran. The CEA makes a very interesting point when he writes, "Indeed, it is conceded that fiscal policy has a large role in inflation management. If so, that begs the question of whether fiscal authorities should be part of the decision making process." The Ministry of Finance is the sole authority for preparing India's annual budget. The 2024 Budget estimates total receipts other than borrowing at Rs 32.07 trillion and total expenditure at Rs 48.21 trillion. "The net tax receipts are estimated at Rs 25.83 trillion and the fiscal deficit is estimated at 4.9% of GDP." Gross market borrowing will be Rs 14.01 trillion and net will be Rs 11.63 trillion. pib,gov.in. A summary of the budget states, "New 109 high-yielding and climate-resilient varieties of 32 field and horticulture crops will be released for cultivation," "In the next two years, 10 million farmers across the country will be initiated into natural farming" and "Rs 1.52 trillion for agriculture and allied sector announced for this year." pib.gov.in. Since the government is the largest borrower by far it sucks liquidity from banks and raises lending rates. "Liquidity in the Indian banking system steeply declined to Rs 0.95 trillion from a high of Rs 2.86 trillion, according to a research report by the Union Bank of India." TOI. "After reverses in the general election and facing possible losses in state polls this year, Indian Prime Minister Narendra Modi's coalition has stepped up cash handouts, debt waivers and other freebies, although he has previously criticised the policy." The Print. More cash in the hands of people should increase demand and push up prices. So, higher interest rates increase the cost of government borrowing and may induce greater discipline in spending. "The Monetary Policy Committee (MPC) of the RBI is to be reconstituted soon," and "These members are appointed by the government for a term of four years," wrote Madan Sabnavis. The government should abolish the MPC and monetary policy should be set by the Finance Ministry. As advised by the CEA.