India's Chief Economic Adviser, V Anantha Nageswaran, stated in an interview with Bloomberg TV at the Barclays (LON:BARC) Asia Forum that the Reserve Bank of India (RBI) would not need to increase interest rates even if the US Federal Reserve tightens its monetary policy. This decision is independent of the Fed's actions and is influenced by India's robust external finances and financial stability.
Nageswaran clarified that even a 25 basis point hike or more by the Federal Reserve would not necessitate a parallel move by RBI. The Federal Reserve is considering future rate hikes due to inflation consistently above its 2% target and strong economic growth. On the other hand, RBI has maintained its policy rate at 6.5%, indicating a stringent monetary policy unless inflation aligns with the midpoint of its 2-6% target band.
The Chief Economic Adviser highlighted that India's economy, which is expected to grow over 6% this year, benefits from stronger macroeconomic fundamentals and well-behaved oil prices. He added that the RBI's projections are based on a crude oil price of $85 a barrel in H2 of the fiscal year, contrasting with India's crude oil basket average of $90.08 a barrel in October.
Nageswaran also dismissed speculations about Prime Minister Narendra Modi offering handouts to farmers and support for poorer households ahead of the 2024 elections, ruling out any relaxation in fiscal policy. This statement underscores the government's commitment to maintaining fiscal discipline while supporting economic growth.
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