Policy easing call in this cycle to be more data-dependent

Of the six members of the Reserve Bank of India's Monetary Policy Committee (MPC), only Saugata Bhattacharya voted for a 25 basis point rate cut in the June policy, while the other members were in favour of a 50 basis point cut. Bhattacharya, in an interview on the phone with Manojit Saha, says action on rates will be based on incoming data, given the elevated levels of uncertainties. Edited excerpts:

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You talked about uncertainties while voting for a small rate cut. Now the West Asia crisis has escalated. How do you see the dramatic escalation of conflict and its impact on the exchange rate, prices, and monetary policy?

Here I am speaking only for myself and these are my personal opinions.

It is difficult to understand the ramifications of, let alone quantify, this type of geopolitical shocks. Rather than specific events, we need to get a sense of the effects of the totality of the various vectors of uncertainty. The core issue was that, during the meeting, various assumptions had been made for models and qualitative forecasts, and those assumptions were liable to change very quickly—in a matter of days if not weeks.

This (West Asia conflict) is just one of the sources of uncertainty. The degree of trade and tariff uncertainty might have diminished since the April MPC meeting but the contours remain just as fluid and the overall level can be expected to remain elevated. So caution is deeply embedded in my thinking.