It's not just food.

"Commerce Minister Piyush Goyal called upon RBI to cut rates, arguing that targeting food price inflation through interest rates was an 'absolutely flawed theory'. His statement came after RBI Governor Shaktikanta Das warned of upside risks to inflation from factors like food prices and said that a rate cut should not be taken for granted." TOI. The year-on-year consumer price index (CPI) inflation rate for October 2024 was 6.21%, while food price inflation came in at 10.87% (Provisional). pib.gov.in. "In September, inflation stood at 5.49%, which was a nine-month high." "Core inflation, which excludes food and fuel prices, remained stable at close to 3.7% in October." Reuters. It is not just food inflation as the minister says. The Indian rupee was around 60 to the US dollar in 2014 (Thomas Cook) and has since fallen to Rs 84.45 to one dollar this morning (xe.com). That is a fall of over 40%. The fall in the exchange rate of the rupee increases the price of imports and results in higher prices of consumer goods. The RBI has been supporting the rupee by selling dollars. Our foreign exchange reserves dropped to $682.13 billion on 1 November (ET) after climbing to $704.89 billion on 27 September (Reuters). "The Ministry of Finance's latest monthly review acknowledged consumer demand was softening." "The spending splurge post-Covid and the high profits made from exorbitantly priced premium goods saw a couple of good years for companies." "They got greedy and hiked prices." "White goods prices have seen repeated hikes. No home buyer in a major city can find a decent flat for less than Rs 5 million. The slowing of consumption today is nothing but pushback by consumers," wrote Gurbir Singh. If inflation is not a problem, as the minister says, why has the Dearness (inflation) Allowance for the pampered highly-paid government employees been hiked to 53% of basic salary? HT. Core inflation, which measures the change in prices of goods and services excluding those of food and energy sectors (Investopedia), "has averaged 3.5% in 2024-25. It averaged 6.2% and 5.3% in 2022-23 and 2023-24, respectively. So RBI has managed to control the non-food and non-fuel part of inflation." High food inflation may result in demand for higher wages. Low interest rates during the pandemic changed the savings and investing behavior and encouraged people to look for higher returns by investing their savings in stocks. If interest rates are lowered more money will flow into stock markets and bank deposits will drop. Banks will then have less money to lend for long term borrowing. This will hamper growth, wrote Vivek Kaul. If inflation continues to remain high people will be tempted to buy gold. "Analysing returns of financial assets between June 1999 and March 2021 shows that gold is an effective hedge against inflation. Inflation-adjusted or real returns on gold has always been positive over this period," wrote Pramit Bhattacharya. Finally, the government can easily bring down the cost of food by reducing the exorbitant taxes on fuel. Food is transported by trucks and tax on diesel is 50% of its retail value. cleartax.in. Instead of hectoring the RBI the government should take responsibility. You can't have your food and eat it. Can you?