India Independence Day: Prime Minister Modi talks up economy
August 15, 2016, 5:35 am

Indian Prime Minister Narendra Modi waves to crowds during address to the nation from the 17th Century Red Fort in Delhi [Image: PMO, India]

On Sunday, the IMF raised questions over the ability of the Indian Central Bank to target inflation through monetary measures.

Delivering his third Independence Day address on Monday, Modi backed the 4 per cent inflation target, within a range of 2 percentage points either way, that had been agreed with outgoing Central Bank governor Raghuram Rajan.

The interest rate from next policy, due on October 4, will be decided by a six-member monetary policy committee (MPC) instead of the central bank governor.

“In the absence of effective and reliable links between the policy instruments controlled by the RBI and aggregate demand in the Indian economy the public may lack confidence that the RBI is able to deliver on its announced inflation target, making the target more difficult (and costly) to achieve,” said the IMF working paper – ‘Monetary Transmission in Developing Countries: Evidence from India’ on Sunday.

Figures last Friday showed inflation nudging over 6 per cent, outside the target range.

The IMF working paper assumes significance as the Reserve Bank of India has recently implemented an inflation-targeting regime that requires it to hit publicly announced targets for retail inflation, based on Consumer Price Index (CPI).

On Monday, the Indian Prime Minister said his government had brought down consumer price growth from double digits under the last government.

Modi addressed the nation on the occasion of the 70th Independence Day from the ramparts of the Red Fort, an Indian landmark 17th century complex of fortified buildings.

Modi listed out his government’s achievements in the past two years and claimed his government had dramatically improved the quality of governance.

Since taking office in May 2014, Modi has expanded foreign direct investment in sectors such as airlines and railways and overhauled a century-old bankruptcy law.

Indian lawmakers this month unanimously approved the creation of the goods-and-services tax, or GST, that would create one of the world’s biggest single markets.

The move bolstered the government’s credentials of being able to push through difficult legislation.

During his speech on Monday, Modi noted that a strong economy alone would not strengthen India, the country also needed a “stronger society”.

Modi stated that unity in diversity was India’s strength. “Violence and discrimination has no place in our society”, he added.

India’s 1.3 billion people speak more than 700 languages.

The majority of India’s estimated 1.2 billion population is Hindu. However the country is also home to large Muslim, Christian and Buddhist minorities.

India has witnessed the rise of sectarian tensions and religious riots since Independence from colonial rule.

Members of India’s low-caste Dalit community have launched a stir to protest historical injustices done to them by India’s upper castes.

Unrest in Gujarat, the home state of the Indian Prime Minister, erupted last month after four Dalit men in the city of Una were tied to a car, stripped and flogged by Hindu vigilantes, who accused them of skinning a cow, a revered animal for Hindus.

TBP and Agencies