"OPTIMISTIC OF A PICK-UP IN PRIVATE INVESTMENT"

Saugata Bhattacharya, external member of the Monetary Policy Committee of the RBI and Senior Fellow at the Centre for Policy Research on the state of India’s economy

- BY SURABHI

SAUGATA BHATTACHARYA, who is an external member of the Monetary Policy Committee of the RBI and Senior Fellow at the Centre for Policy Research (CPR), believes that trends in various commodities groups suggest optimism on inflationary pressures. In an interview to Business Today, he says that there is space for further repo rate cuts given the inflation forecast and notes that the real repo rate remains restrictive. The RBI has already cut the repo rate twice this year following the February and April MPC meetings. Edited excerpts:

"EVEN IF A HOT SUMMER INCREASES VEGETABLES PRICES, THERE IS ROOM FOR HEADLINE INFLATION TO REMAIN DURABLY CLOSE TO 4%"

The MPC has cut rates twice this year in Feb-ruary and April and has an accommodative stance. Is there space for further rate cuts, as is being factored by the markets?

At the outset, let me emphasise that I am speaking only for myself and these are my personal opinions. Yes, given forecast inflation, the real repo rate continues to remain restrictive, and the present inflation-growth balance is tilted towards the need to support growth.

What does the ongoing trade war between China and the US mean for the world economy?

There is extreme uncertainty, and with the contours of trade alignment remaining fluid, it is difficult to even remotely predict an equilibrium state. Supply chains are dislocated again and we can only surmise alternative scenarios over the next six months of a changed global economic order, both institutional and bilateral. Overall, in line with the latest IMF and other multilateral forecasts, this is likely to be somewhat adverse for global economic and trade growth.

Domestic growth has been slowing, and the RBI expects the economy to grow by 6.5% this fiscal. Do you think the economy could slow further given the concerns around the US trade policies?