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India's Top Economic Adviser Assures No Pressure on RBI to Raise Interest Rates Amid US Fed's Tightening Policy
"The RBI's rate adjustments are not closely tied to the Federal Reserve's actions, primarily due to the improved state of external finances and financial stability," stated India's Chief Economic Adviser, V Anantha Nageswaran, in a recent interview with Bloomberg TV's Haslinda Amin. He added, "Even if the Fed were to increase rates by 25 basis points, or do so twice, this would not compel the RBI to follow suit."
The Federal Reserve recently decided to maintain its current interest rates, alluding to potential future rate hikes due to persistent inflation exceeding its 2 percent target and robust economic growth.
While India's central bank has left its policy rate at 6.5 percent for four consecutive times, it has indicated that monetary policy will remain stringent until inflation stabilizes within the midpoint of its 2 percent to 6 percent target range.
"The RBI now possesses a greater degree of flexibility, thanks to robust macroeconomic fundamentals," noted Nageswaran.
India's economy is projected to achieve a growth rate exceeding 6 percent this year, with manageable risks stemming from oil prices and weather, according to the Chief Economic Adviser.
"Concerning oil prices, we find ourselves well within a safety margin," he stated at the Barclays Asia Forum in Singapore. "With a favorable monsoon and stable oil prices thus far, there is minimal apprehension regarding the 6.5 percent growth expectations for the current fiscal year."
The RBI's projections are based on a crude oil price of $85 per barrel in the latter half of the fiscal year. However, India's crude oil basket averaged $90.08 per barrel in October, as per government data.
Additionally, Nageswaran expressed the belief that fiscal policy adjustments are unlikely in the lead-up to the 2024 summer elections. Economists anticipate that Prime Minister Narendra Modi may provide support to Indian farmers and disadvantaged households as he pursues a third term in office.
