Deepshikha Sikarwar & Bodhisatva Ganguli in an interview. The government will look at taxes on fuels if prices shoot up, she says. Edited excerpts:Some analysts feel that the RBI may be behind the curve in raising rates. What are your views?
These are judgements that observers can make. Are they in a hurry to make these or should they be waiting for some time to assess if the decision by the MPC (monetary policy committee) is right, or they (RBI) are behind? I think, between the government and the RBI, there is an understanding that we have to be watchful of what’s being done by the US Fed or the ECB (European Central Bank). This mindfulness and watchfulness of what is going on has been well understood between us and the RBI for nearly 6-8 months. Therefore, the calls that we are taking — MoF (Ministry of Finance) or the Reserve Bank on its own. The RBI is seized of what is in the economy in terms of liquidity and exchange rate fluctuations. I don’t think I will jump to a conclusion. Two of us are seized of the matter and lessons of the taper tantrum have been more than once read through. We shall avoid mistakes of that kind.
If inflation doesn’t abate, there is a fear that the US Fed may tighten aggressively, and a similar situation may play out here as well…
I understand your observation that the US Fed is behind the curve given that the US economy is, or the European economies are, having an inflation of the nature that they have never seen or endured in 2-3 decades … in the case of the US, the last four decades. Their complexity is vitiated by the fact that they had interest rates being absolutely rock bottom or even negative for a very long time prior to the pandemic. And just about…