I do not think the Monetary Policy Committee (MPC) is directly under the governments control. It has a very respectable chair in Bimal Jalan, Abhijit Banerjee, Professor of Economics, MIT, tells ET Now.
Do you think there is a chance of a rate cut?
I do think they will go ahead with the rate cut as the rupee has recovered. Overall, there is not really a strong reason not to do it. I would say that given that the political pressures in same direction, I do not see a reason why it would not happen it is just prediction that it will happen.
How do you think things will be different now that a RBI Governor has been appointed?
These moments are going to be critical. As you saw before, demonetisation happened in the first few weeks of Urjit Patels stay and that is a period where the governor really does not know where he stands and it is very hard for them to push back. If you are worried about the government overreaching, this is the moment they will tend to overreach because the governor is new, he feels okay the government chose me, I am honoured. First day should I say no to them? That is difficult. I think conversely, the government wants to let him achieve credibility. They should not make too many demands of him, but I do not know.
What happens to the much contentious issue of transfer of reserves now with the new governor in place and political pressure being there. What is your take on that?
I am pessimistic, I mean some reserves will be transferred. I do not know how much and maybe there will be some compromise and maybe leave some independence on table. The people who are with the committee at least are very well equipped to handle it. I think it is chaired by Bimal Jalan, who is someone I respect a lot. I do not think it is directly under the governments control. The committee at least has a very respectable chair. So. he has some independence.