The government and the Reserve Bank of India (RBI) are not going to tinker with the inflation target for next five financial years (2021-2022 to 2026-27), Tarun Bajaj, Secretary, Department of Economic Affairs, Ministry of Finance, told the media today.
The government will continue with the target of maintaining retail inflation at 4 per cent (+/- 2 per cent) for the next five financial years. The monetary policy framework was scheduled for a review and there were a lot of speculations that the government might revise the target on the higher side.
However, many monetary policy experts, including former RBI governors Raghuram Rajan and D Subbarao, had advised the government against tinkering with the inflation target.
Recently, in an interview to a news agency, former RBI governor Rajan had said that "the framework has helped bring inflation down, while giving the RBI some flexibility to support the economy."
"I think the framework has been beneficial in bringing down inflation, I don't think it has been costly in slowing growth, and this is probably the wrong time to make drastic changes," Rajan had said.
Meanwhile, the DEA secretary informed that the government had made gross borrowings of Rs 13.7 lakh core (and net borrowing of Rs 11.4 lakh crore) in 2020-21, a record in the history of the Government of India.
The initial borrowing target for the fiscal year was Rs 7.8 lakh crore, which was revised upwards to Rs 12 lakh crore.
The DEA Secretary, however, maintained that the weighted average cost for borrowing was 5.8 per cent, lowest since 2004-05. The weighted average maturity for bonds issued was 14.49 years.
In 2021-22, the government has a gross borrowing target of Rs 12.05 lakh crore (net borrowing of Rs 9.37 lakh crore). In the first half of 2021-22, the government plans to borrow Rs 7.24 lakh crore, which is 60 per cent of the gross borrowing target for the year.