Budget 2015: Monetary Policy Committee to be Formed to Target Inflation, Says Arun Jaitley

NDTV Profit Desk

28 Feb 2015, 07:07 PM IST

Finance Minister Arun Jaitley presenting Union Budget for 2015-16

Finance Minister Arun Jaitley expects retail inflation to stay low at 5 per cent at the end of the current fiscal; the objective of the government will be to keep inflation below 6 per cent, he said in his Budget speech.

To target low inflation, a Monetary Policy Committee will be created for which the RBI Act will be amended, Mr Jaitley said.

"We have concluded a monetary policy framework with RBI with the objective of keeping inflation below 6 per cent," he added.

Lower inflation opens up space for more monetary policy easing. If the central bank cuts interest rate, millions of consumers would benefit from lower EMIs.

The fall in retail inflation has been made possible by a crash in crude oil prices. India is dependent on imported crude for 80 per cent of its domestic needs.

According to the Economic Survey, inflation for 2015-16 is likely to be below Reserve Bank's target by 0.5 - 1 percentage point. The RBI is targeting 6 per cent consumer inflation by January 2016.