RBI Governor Urjit Patel says GST will not harden inflation

Governor of Reserve Bank of India (RBI), Urjit Patel, gave a positive outlook about growth and dismissed any fears of inflation, especially due to the Goods and Services Tax (GST)

Patel met economists recently in which he hinted at RBI’s dovish to accommodative stance, even as the rate cut will be jointly decided by the six-member Monetary Policy Committee (MPC).

"The governor is of the view that the GST (goods & services tax) regime would not harden inflation as is widely perceived. He said there will be many items whose prices would fall and therefore help in at least partially offsetting the increase in prices of other items of consumption. He also believes the weight assigned to public sector housing and the rent in the calculation of the consumer price index should be lowered. Patel informally discussed with the group of economists whether the weight (which could raise CPI following higher outgo on public sector salary and HRA) should be cut," a person aware of the discussions told ET.

Meanwhile, inflation is going in the downward direction but the industrial production growth has slipped into negative.

"The governor is not dismissive of the new GDP data (which, according to many, appear unrealistic). While he thinks the GDP numbers based on the new series need a lot of explanation, the old series was even worse," the person told ET.