RBI To Maintain Autonomy In Monetary Policy Despite US Fed Actions, Says Chief Economic Advisor V Anantha Nageswaran

India's central bank, the Reserve Bank of India (RBI), is not expected to face pressure to hike interest rates in tandem with the US Federal Reserve, according to India's Chief Economic Adviser, V Anantha Nageswaran.

As per reports by Business Standard, Nageswaran highlighted that the RBI's monetary policy is not closely linked to the Fed's due to improved external finances and financial stability.

Nageswaran stated, "The RBI cycle has not been so tightly linked to the Fed cycle mainly because external finances and financial stability are much better now. If the Fed were to hike 25 basis points, or even two times, that will not put pressure on the RBI to follow suit."

While the Federal Reserve left interest rates unchanged recently, they have not ruled out the possibility of further rate hikes due to inflation exceeding its 2 per cent target and robust economic growth.

In contrast, the RBI has maintained its policy rate at 6.5 per cent for four consecutive times, indicating a commitment to tight monetary policy unless inflation aligns with its 2 per cent to 6 per cent target band.

Nageswaran emphasised that the RBI now has "some degree of freedom" thanks to strong macroeconomic fundamentals. India's economy is poised to grow over 6 per cent this year, with manageable risks associated with oil prices and weather conditions.

Addressing concerns over oil prices, Nageswaran stated, "We are well within the margin of safety on oil prices. With a decent monsoon behind us and oil well-behaved so far, there’s not much concern on the 6.5 per cent growth expectations for the current fiscal year."

Nageswaran also expressed the view that fiscal policy is unlikely to be relaxed ahead of the 2024 elections.