A Prasanna, chief economist of I-Sec PD, spoke to CNBC-TV18 about the new back series gross domestic product (GDP) data that has lowered the GDP growth rates for a majority of the previous 10 years of the United Progressive Alliance (UPA) regime.
“I view GDP revision as an academic exercise and I don’t think there is too much to be gained from that. The issue for us is that by revising it down, now this is not consistent with rest of the variables like current account deficit (CAD) and inflation which we saw in those period so I am sceptical of these numbers,” Prasanna said on Thursday.
Talking about the weakness in the US dollar following dovish comments from the Federal Reserve Chairman Jerome Powell, he said, “I don’t think Jerome Powell has said anything new. The market is probably overpriced to the extent of Fed hikes and now we are seeing a correction to that. Even apart from that, the way oil has moved and there has been an improvement in expectations about current account and that leads to better sentiment on capital flows also. So to that extent, sentiment is positive on rupee. The rally in rupee can continue but I would expect at some point the Reserve Bank of India (RBI) to come and intervene because they have spent so much of reserves this year. So I am sure there is a strategy to recoup some of that also.”
With regards to the next month's monetary policy, Prasanna said, “I think what the RBI would do is they will settle for a prolonged pause. It is not clear whether they will communicate it with so many words but probably we are looking definitely at a 6-9 months kind of a pause and rates and then it will become data dependent."
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