Economic Advisory Council to the Prime Minister (EAC-PM) Chairman S Mahendra Dev has said that India should negotiate a trade agreement with the US on its own terms, keeping in view the national interest. He expressed hope that India will have an advantage over other countries on tariffs once the Free Trade Agreements (FTAs) are signed, and it would boost exports. He said the negotiations are going on and the ultimate decision depends on the mutual interests of both countries. The Indian team is in Washington for the fifth round of negotiations for the proposed Bilateral Trade Agreement (BTA).

Regarding should India has a slightly higher inflation target rate for a growth economy, Dev said there is no need to increase inflation target when the present framework is doing well on both inflation and growth objectives. He noted that there are some suggestions that RBI should use core inflation, excluding food for inflation targeting (IT). He said ‘we will have better inflation data from CPI after the revision of base year to 2024.’ He said the experience of (IT) in the last 10 years shows that Inflation stayed within the band of 2 per cent-6 per cent with some exceptions and inflation declined significantly under IT framework. He said it may be noted that higher inflation hurts the poor and middle class mostly. Low inflation is also important for sustainable growth. 

Since 2016, India has adopted a flexible IT framework where the RBI aims to maintain a specific inflation rate, currently 4 per cent, with a tolerance band of +/- 2 per cent (i.e., between 2 per cent and 6 per cent). Similarly, he said the Fiscal Responsibility and Budget Management (FRBM) targets should be continued for sound fiscal management. He said it may be noted that a higher fiscal deficit will increase inflation and hurt growth and added that Interest payments will be higher and lower funds will be left for development expenditure. While noting that the government has done well to reduce fiscal deficit from 9.2 per cent in FY21 to 4.8 per cent in FY25 and budgeted 4.4 per cent in FY26, he said the government has been sticking to its fiscal consolidation roadmap despite competing demands for expenditures.