RBI, Government To Work To Contain Inflation At 4%: PM Modi

New Delhi: Dispelling fears that Goods and Services Tax (GST) will fuel inflation, Prime Minister Narendra Modi on Monday said the government and the Reserve Bank of India have agreed to maintain an inflation target of 4 per cent.

He said the target has been set by a legislation and it would be incumbent on the RBI as well as the officials to see that inflation remains at 4 per cent with a margin of plus or minus 2 per cent.

Intervening in a debate on Constitution (122nd Amendment) Bill in the Lok Sabha, PM Modi said there have been continuous discussions over growth and inflation.

There is also a perception that the government and the RBI have differences over the issue of inflation and growth, he said, adding that the government by law has fixed an inflation target.

The Prime Minister's remarks, a day ahead of the RBI's monetary policy, also come against the backdrop of alleged differences between the government and outgoing central bank governor Raghuram Rajan. It would also be the last RBI policy of Mr Rajan.

Consumer Price Index-based retail inflation rose 5.77 per cent in June, the fastest pace in 22 months and it is expected that the implementation of the new GST may push it up further.

While stating that there have been concerns about revenue and fiscal deficit, PM Modi said the Fiscal Responsibility and Budget Management (FRBM) Act enables financial discipline and ensure a "balanced approach" in ensuring positive change in the economy of states.

It has also helped in improving the financial health of the states, he added.