"FURTHER RATE CUTS DEPEND ON INFLATION"

Economist Nagesh Kumar, external member of the RBI's Monetary Policy Committee, on why food inflation is more manageable this year but crude could be a concern

-  SURABHI

Nagesh kumar, external member of the Monetary Policy Committee of the Reserve Bank of India and Director and Chief Executive of the Institute for Studies in Industrial Development (ISID), says India remains a bright spot in the global economy because of its lower dependence on global trade, strong macro fundamentals and a diversified crude oil basket. In an interview to Business Today, he explains why 6.5% GDP growth in FY26 remains achievable, despite elevated global crude oil prices. Edited excerpts:

The monetary policy committee has cut rates thrice in 2025, including a 50-basispoint cut in the last policy review. Is there space for further rate cuts, as is being factored in by the markets?

It depends on inflation. If inflation stays within 3% for instance, there would be more space for rate cuts, but if inflation shoots up to 4%, then there may be limited space. A positive real interest rate is needed to ensure that savings are not disincentivised. If you put your money in the bank and you're not getting any return, whatever you're getting is being impacted by inflation. Why would anybody put their savings in the bank? It needs to be ensured that a real, positive rate of return on investment is provided, and savings remain incentivised. Keeping that in mind, the repo rate should be higher than the rate of inflation so that there is a net real rate of interest.

Do you think the RBI rate cuts will finally nudge corporate profitability and investment plans in the ongoing fiscal year?