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Finance Minister Nirmala Sitharaman said in the Lok Sabha on Monday that authorities are attempting to ease the country’s inflation rate below 7%, after rising prices have consistently breached the central bank’s target this year.

“We are keeping an eye on inflation and will certainly bring it down below 7%," Sitharaman said.

In an hour-long speech, the FM highlighted the work of Prime Minister Narendra Modi-led BJP government.

She said India's economy is in a healthy condition by citing data from the International Monetary Fund (IMF) and prominent economists such as Raghuram Rajan. The FM also gave the reply to questions related to GST on staple food items such as flour, rice, and milk.

Tangled supply chains and shortages stemming from the war in Ukraine, coupled with a weakening domestic currency are adding to inflationary concerns in Asia’s third-largest economy, with prices staying above the central bank’s 6% target ceiling since the beginning of the year. 

Retail inflation rose 7.01% in June from a year earlier and price gains remain elevated following the rupee’s 5.9% decline against the dollar this year, keeping India’s import bill high. 

Also Read: FM Nirmala Sitharaman justifies the high cost of food prices; Here's what she said | 10-point

The Reserve Bank of India, which has faced criticism for not acting aggressively enough, has raised interest rates by a total 90 basis points in two moves this year and is scheduled to hold its next monetary policy review later this week on Friday. If prices are not brought down to the mandated 2%-6% range, the central bank will have to answer why it failed to do so. 

Also Read: RBI monetary policy: How much rate hike is on the cards

India’s federal government took a raft of measures in May including, excise duty cuts on fuel, enhancing subsidies and slashing import duty on some edible oils to tame prices. The cooling of global commodity prices may ease inflation woes for the country, but for the fall in the currency that slid to record lows last month. 

In Monday’s parliament session, Sitharaman attempted to diffuse concerns over the lowering of India’s growth forecasts by various banks and agencies. She said the nation’s economy was “showing very positive signs" and remains among the world’s “fastest growing" nations, despite the global downturn.

“There is no question of India getting into recession or stagflation," Sitharaman said, adding that India had “sufficient" foreign reserves. 

She said India has avoided economic predicaments that have led neighboring Bangladesh, Sri Lanka and Pakistan to seek International Monetary Fund support this year.

(With inputs from Bloomberg)

 

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