Ram Singh, Member of the Reserve Bank of India’s Monetary Policy indicated that growth expectations have been moderated, with the current forecast pegged at 6.9%, reflecting a 50–60 basis point impact from geopolitical disruptions.
By Latha Venkatesh
Ram Singh, Member of the Reserve Bank of India’s Monetary Policy Committee, has flagged a cautious policy stance as global uncertainties continue to weigh on the economic outlook. "I have argued for a dovish pause. At the same time, I have also changed my position and become more cautious," Singh said.
While risks from the ongoing West Asia conflict and elevated crude prices persist, he said India’s macroeconomic conditions remain relatively stable, with inflation still within the central bank’s comfort zone.
Singh indicated that growth expectations have been moderated, with the current forecast pegged at 6.9%, reflecting a 50–60 basis point impact from geopolitical disruptions. Despite this adjustment, he said the economy continues to exhibit resilience, supported by strong underlying fundamentals and recent growth trends that remain above 7% over the past few years.
Singh highlighted that the RBI is committed to maintaining adequate liquidity in the system.
These are edited excerpts from the interview.Q: Isn’t it a bit bold to say dovish pause when you can see that there are upside risks to inflation and downside risks to the currency?
A: The views I express in this programme are my own. They do not reflect the views of the MPC or the Delhi School of Economics, where I work. With those caveats and clarifications, as you rightly pointed out, I have argued for a dovish pause. At the same time, I have also changed my position and become more cautious. All things considered, I agree with your assessment that my tone and views are dovish. These views are justified, in my view, given the data that we have today.
It is true that that that there is an upward pressure on inflation, and also there is a downside risk on growth that have materialised to a limited extent. But the economy on inflationary front and also growth front remain in a comfortable zone at the moment, inflation remains well within the limit of the mandate for MPC. Growth has taken a hit. With respect to past performance growth, even today does not look bad. But when I say that growth has taken a hit, it is more with respect to the potential growth, rather than the numbers that are being forecast and the numbers that I go with.
Read Here | Exclusive | RBI not looking to raise rates to defend rupee for now, says MPC member Nagesh KumarQ: You have a sentence saying, as per my assessment, growth forecast is lower by 50 to 60 basis as of now due to the West Asia conflict. Are you seeing that even the 6.9% is difficult?
A: No, 6.9% is after factoring in the 60 basis points.
Q: From 7.6%, bringing down to 6.9% is your 50 to 60 basis point worry is that right?
A: Absent, West Asia crisis, I would have expected 7.5% and upward growth rate. This number is also justified. If you look at new series data on growth, last four years, out of last four years for two years we have grown upward of 7.45% and in all four years for which we have a data, we have grown more than 7%.
Also, please note that we have achieved this growth rate at a very benign inflation rate. This suggests that that at the growth rate that we have experienced during last 2, 3, 4 years, was the growth rate without much of hitting to the economy? So that indicates that there's a potential to grow faster without hitting the economy. West Asia crisis have changed things little bit.
Q: Another statement which really stood out - you said that I am going for a dovish pause while it is true that this dovish pause is not going to help. On the external front, given the falling rupee. Now, was this discussed in the MPC, the same doubt that occurs to you that if I look very dovish, am I endangering the currency? Was that a point of discussion?
A: In MPC, we discuss all issues that are relevant for the economy, from unemployment to exchange rates to everything. Our mandate is to make our arguments and be guided by inflation data and growth data. But by way of discussion, we discuss each and every issue that is relevant for Indian economy.
Q: Do you worry that if the Reserve Bank pours so much liquidity, even now, the call rate is at the lower end of the corridor, closer to 5% and not at 5.25%. Is there a fear that this dovishness, signified or reflected by the liquidity and the dovishness in your tone can be negative for the currency? Is that a thought?
A: Let me elaborate on what I made. As far as the liquidated position is concerned, honourable RBI Governor has made it amply clear that RBI will take good care to ensure that ample liquidity is available in the system all the time. My dovish pause is also in the same spirit. It is more of a signal that as of today, given by whatever information data we have there is no reason for us to think of increasing interest rates. It is it should be seen in that spirit.
If we have dovish pause, when the inflationary outlooks are becoming somewhat cautious or alarming for some parts of the world, not for us, but for other countries in that situation, we can expect that perhaps that many central banks would be thinking of either a pause or maybe an increase in interest rates. The interest rate differential advantage we will not have, and we will not be signalling that we will have interest rate differential advantages so you should look at my statement from that point of view.
At the same time, I would like to say that we have several other advantages even on the external front, even on the capital account, current account front and everything considered today, there's no sense, I am not alarmed at all.
Q: It has been about two weeks since you wrote your minutes on April 8. The war has persisted, and crude prices remain in triple digits at around $102. Are you getting a sense that things have worsened? In your minutes, you mentioned that the Goldilocks scenario has shifted to the opposite extreme. Has the situation deteriorated further since then? The war, as of now, shows no signs of ending, and even the Strait of Hormuz does not appear to be reopening. Do you think the growth outlook has worsened? Should we expect downward revisions to growth forecasts and upward revisions to inflation forecasts going forward?
A: With every passing day, this conflict persists, it is going to be making things worse for the entire world, for us also, it's not going to be of any help. At the same time, there's the alarming signals are not there for Indian economy. Government has done a very good job of controlling prices, retail prices of petrol, diesel, LPG, it also has done a great deal of restoring supply to commercial sector of gas and fuel products. So as a result, the because first order effects have been mitigated, we are not seeing any second order effects. Unless we see there are second order effects, I will not be alarmed for Indian economy.
I would also like to add that it is also a crisis that we are turning into an opportunity. This is happening at the government level and also at the household level. At household level, we see greater use of induction, so substitution of energy mix is already happening. This is something we need very much, our energy mixed household is sub optimum whether we compare it to US, we compare it to China, we need to consume more of electricity. Our energy consumption needs to be more in form of electricity, and this gives us a good nudge.
Let me also add that we have a capacity to accommodate this nudge coming from commercial and household sectors, because our total installed capacity, especially in renewables is more than what we are consuming today. We can afford to produce more power with a healthy mix.
Let me also hear one more crucial point, it is not an interest of anybody, including parties involved in this conflict, to prolong this conflict, because it is hurting every single player who is involved or not involved. Every single country is being adversely affected. It is therefore my hope that this conflict will be resolved, sooner rather than later.
Once that happens, with respect to petrol, with respect to West Asia prices, we have been focusing primarily on crude, but not on other products that that in that are downstream products, where we have advantage. We have two-fold advantage. One is our refining capacity. We are net exporters there. And other is that the Gulf refining capacity has taken a hit, so this will help us mitigate second order effects.
For full interview, watch accompanying video
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