Prime Minister Narendra Modi on Monday backed a new inflation target of 4 per cent as he vowed to keep food inflation under check and ensure that the food plate of the poor does not become expensive.
Delivering his third Independence Day address from the ramparts of Red Fort, he said his government has not allowed the rate of price rise to cross 6 per cent as opposed to the double digit inflation during previous government.
"In the past government, inflation rate had crossed 10 per cent. We have not allowed inflation rate to cross 6 per cent because of the continued steps taken by us," he said.
Modi backed the 4 per cent inflation target, within a range of 2 percentage points either way, set for the next five years under the monetary policy framework agreement with the Reserve Bank of India (RBI).
"We have entered into an agreement with the Reserve Bank that the RBI will take steps towards controlling inflation in the range of 4 per cent, plus/minus 2 per cent. So that they rise above the debate and work for balancing inflation and growth," he said.
In accordance with a monetary policy framework agreement it had entered into with RBI in February last year, government earlier this month notified consumer price inflation target of 4 per cent for the next five years, with an upper tolerance level of 6 per cent and lower limit of 2 per cent.
This was seen as the government putting the seal on outgoing RBI Governor Raghuram Rajan’s inflation-first model of monetary policy.
Consumer prices (CPI inflation) rose 6.07 per cent in July, the fastest pace in nearly two years, and it is expected that the implementation of new Goods and Services Tax (GST) may push up inflation further.
Modi said the country had faced two consecutive years of drought, pushing vegetable prices up. Also, pulse prices were a cause of concern.
Coupled with these factors, if the inflation were to rise at the pace witnessed in past, "I don’t know what would have happened to a poor country like ours," he said.
"We have made a lot of efforts to contain price rise," he said, adding he will leave no stone unturned to live up to expectations of people in controlling prices.
Modi said, "I will do all it takes to ensure that the poor man’s food plate does not become expensive."
On spike in prices of pulses, he said sowing of pulses has risen by 1.5 times this year and with good monsoon and efforts like Minimum Support Price and bonus to farmers as well as increasing availability will make things better.
While monsoon has been good this year, excess rainfall has caused problems at some places, he said, adding that the government is fully committed to helping such states.
Modi said unlike past governments, he has stayed away from populist measures and instead relied on empowerment.
The Prime Minister said efforts by his government have led to 99.5 per cent of past dues of sugarcane farmers in Uttar Pradesh being cleared and 95 per cent of crop being sold this season being already paid for.
Also, record urea production has meant that blackmarketing of the crop nutrient is a thing of past, he said, adding that farmers are being given crop insurance cover on minimum premium.
Godown capacity of 15 lakh tonnes has been constructed to store crops and emphasis is being laid on all food processing and agro based industries to raise farm incomes.
Hundred per cent FDI has been permitted in food processing. "These steps will help realise the target of doubling farmers’ income by 2022," he said.