Post 25% penal tariff, risks clearly tilted to the downside for growth

A calibrated easing approach is essential to balance growth support with household savings attractiveness, said Saugata Bhattacharya, economist and member of the RBI's Monetary Policy Committee (MPC), in an email interview with Mahesh Nayak.

- Saugata Bhattacharya

He flagged downside risks from penal tariffs and trade tensions, while highlighting rural credit expansion, GST recalibration, and monsoon-linked demand revival as key growth drivers. Despite food price volatility, he believes inflation expectations remain well anchored. Excerpts:

With GDP growth projected at 6.5%, what are the key upside and downside risks the MPC is monitoring?

Post the MPC, after the announcement of the 25% penal tariffs, the risks are clearly tilted to the downside for growth. However, we need to see if and when these tariffs are implemented, how long they continue, and responses from government and other organisations to counter some of the adverse impacts.

In addition, the effects of the direct tax cuts and GST rationalisation on consumer demand, the effect of lower borrowing costs on credit offtake and other policy and regulatory interventions needs to be understood better.

How does the divergence between rural and urban demand recovery influence your policy calibration?