‘Room for rate cuts, but global threats loom’

Ram Singh, director and professor at Delhi School of Economics and member of the Reserve Bank of India’s (RBI) monetary policy committee, believes that benign inflation and signs of private investment recovery support further easing. However, he tells Kshipra Petkar that global headwinds and external volatility temper the scope for aggressive rate action. Excerpts:

- Ram Singh, director and

NBFCs show robust financials, and non-bank fund flows to corporates have risen. Manufacturing PMI hit a 17.5-year high of 59.3; services PMI reached 62.9, a 15-year high. These are encouraging, but we need more data to be sure on the private capex front. There’s room for further monetary support.

Given your view that the inflation trajectory is benign, what conditions would prompt you to advocate a rate cut in the next MPC cycle?

Any signs of stress on growth and private investment would further strengthen the case for additional rate cuts. Besides, while deciding on the time and quantum of cut, we have to factor in developments on the external front — exports, exchange rate and capital inflows. However, given the high degree of uncertainty, it isn't easy to provide any forward guidance on this count.

Where do you see the terminal rate at this point in this easing cycle? Do you see the scope for more than one rate cut?