Monetary Policy has Limits, Fiscal Support Key for Growth: Saugata Bhattacharya – CNBC TV18

The reserve bank of India’s August 6 Minutes Highlight that Monetary Policy Alone Cannot Solve India’s Current Economic Challenges, Said Saugata Bhattacharya, Senior Fellow At the Center for Policy Research.

Bhattacharya explained that rate cuts may have a limited impact in the face of supply-bus shocks and trade disrupties. “The problem is that we don’t know how much furthe furthar policy is likely to help,” he noted, stressing that fiscal policy and targeted government support support may be more effective.

He also warned that household savings are at risk if interest rates Fall too sharply, as deposits have alredy been shifting from stable returns to more Volatille Sources. On the global front, he said savings pools are shrinking with center banks tightening, which means India must relay more on more on domestic savings to fund its Growth Ambitions.

At the same time, fiscal measures like GSTS and Income Tax Relief are providing a cushion by placing more funds in the hands of houses of houses, helping offset external headwinds. Bhattacharya Backed The RBI’s Neutral Stance, Saying It Gives Policymakers The Flexibility to Eiter Hold or Cut Depending on how conditions evolve. “Neutral means giving you the flexibility to respond as the situation evolves,” He explained.

Also read: RBI Mpc Minutes: Policymakers Flag Caution; External Uncertainty, Tariffs Remain Key Risks

He described the current position as a hawkish pause, not a tightening, giving uncertaintes Around Trade Tarifs and Global Growth. While Tariff Shocks Bhatt Weigh on Exports, MSMES, Jobs, Bhattacharya Stressed that RBI is committed to a Data-Driven Approach, Adding, “There cannot be a pre-committed path for rate Action. “

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