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Mumbai. Finance Minister Nirmala Sitharaman said Thursday that inflation cannot be handled only by the Centre and ways have to be found to work together with states to manage inflationary matters. She also said that the Reserve Bank of India (RBI) forms a critical part of inflation management, but fiscal policy has to work together with monetary policy in handling the inflationary surge in the economy.

I am not doing politics here but...

She went ahead saying that inflation is higher than the national level in states which have not reduced fuel prices. “Inflation that prevails in different parts of the country – despite the GST, creation of one market, removal of tolls and taxes, and freeing movement of goods – varies from state to state. Now, I am not doing politics here but I’ll bring in an element where you might suspect I am bringing politics, but it has definite relevance. At a time when global fuel prices went up, you wanted to be sure that burden is not passed on to the end consumer. "Coincidentally, I find inflation being higher than the national level inflation in states that have not reduced fuel prices,” she said.

RBI has to synchronise its monetary policy

Noting that she is not giving any forward direction to the RBI, Sitharaman said that even though the RBI has to synchronise its monetary policy with other central banks, it may not be synchronised as much as developed central banks. “I am not prescribing anything to the Reserve Bank, I am not giving any forward direction to the central bank. But it is the truth – India’s solution to handling the economy, part of which is handling inflation also, is an exercise where the fiscal policy together with monetary policy has been at work. It can’t be singularly left to monetary policy, which has proved totally ineffective in many countries,” she said.