Indian government ‘inflation target credible’

Despite that fact that India’s retail inflation jumped to a 14-month high of 6.21% per cent in October – above the central bank’s tolerance band – S&P Global Ratings said it was confident inflation targets could still be met.

It said “supply capacity in India is continuing to expand pretty quickly”, which will help contain inflationary pressure. S&P Senior Economist-Asia Pacific Vishrut Rana said the Reserve Bank of India’s (RBI) monetary policy and inflation target remains credible and the should be able to anchor inflationary expectations. “That remains a manageable challenge,” he said. The retail inflation rate was 5.49% in September, with the jump to 6.21% attributed mainly to rising food prices.

“As long as economies’ supplies capacity continues to expand pretty quickly, which is happening in India at the moment with emphasis on manufacturing infrastructure, we expect inflationary pressure should be contained,” Rana said at the recent Asia-Pacific Credit Outlook 2025 conference.

The RBI, which is mandated by the government to contain inflation at 4% has projected retail inflation to be 4.5% in the current fiscal year.

“For policymakers and households to balance (consumption and sustainable growth) is to making sure that everyone spends within the means and that can increase savings,” Rana said.

He said consumption is a major component for the Indian economy, with private consumption accounting for more than 55% of the overall growth.

“We do see a strong consumption-driven growth outlook for economy. Overall, infrastructure is another component of growth. Urban consumption has been the key driver of growth over the past couple of years,” Rana added.

He added that Indian economy is very heavily domestically oriented, adding that about 85% of the Indian economy relies on domestic demand, meaning the consumer spending is going to drive growth going forward.

Efforts to support agriculture productivity are going to be key in maintaining the momentum of consumption going forward, he said.

Rana further said there is a need to upskill workforce as the focus is shifting to artificial intelligence and digitalisation.

“One issue has been propping up, and we hear about increasingly, is how the rise of artificial intelligence is creating a very difficult labour market for jobs entrants and this is a key challenge for economy to resolve going forward. And policy will have a role to play in upskilling workforce, and tech transition,” Rana added.

 Taxpayer harassment won’t be tolerated, says Finance Minister

It is not the intention of the government to cause any difficulty or harassment for any taxpayer, Union Finance Minister Nirmala Sitharaman said during a recent session with the Citizen Council in Mangalore. She assured that government officials responsible for such behaviour are held accountable for any unintended or intentional harassment to make sure it does not happen.

“If there is any attempt at unfair treatment that comes to my notice, I pull them up severely… If there is any harassment, I appeal to every one of you to let me know. I’ll take responsibility to resolve it,” the finance minister said.

Sitharaman stated that the government is adopting a trust-based approach towards citizens, extending this philosophy not only to direct taxes but also to Goods and Services Tax (GST).

“We are slowly instructing all field officers to ensure that the government’s efforts to decriminalise, simplify rules, and publish frequently asked questions are aimed at helping people understand their obligations. I trust citizens, so our rules should reflect that trust,” Sitharaman said.

• Sitharaman is set to meet her state counterparts on December 21–22 for pre-budget consultations and meeting of the GST Council, an official said.

The meeting assumes significance as states finance ministers would present their recommendations for 2025-26 Budget to be unveiled on 1 February 2025.

The 55th GST Council meeting would be held during one of these two days in which the much awaited decision on exemption or lower GST rate on health and life insurance would be taken.