Live on Bloomberg TV

00:00It's a bit of a head scratcher isn't it because it's not a lot they can do about inflation. And if you get inflation spiking up while growth is bound to take take a hit as well isn't it. Yes. And in fact the gross inflation tradeoff has only intensified for India as a result of what's happening in Russia and Ukraine. We already had an overly optimistic. A full cause for inflation by the central bank. And a lot of it hasn't even been accounted for. Because Indian state run oil companies have kept prices steady since early December. So we really haven't seen the impact of higher crude oil prices on petrol. Bond prices fell. I mean this is it isn't it. So what do they do. What do you think is going to be the likely course of action by the Monetary Policy Committee. The focus so far has been on growth because the even though India is opening up quite rapidly since the since the last week on week which had a milder impact on growth than previous waves we are seeing that growth is uneven and especially in the services sector. The high Dutch sector. So we get as a result of that. The RBI has been focusing on growth at the cost of higher inflation. If you see the acceptance of inflation above the full percent midpoint of the fixed about 2 to 6 percent target has been much higher by the current RBI leadership. But of course what's happened of late complicates picture very much. Yeah what's complicating things too is what we are seeing in the oil market flowing through into fuel prices to a potential fuel retail price revision. How would that impact government revenue and what in the deficit here. The government had already budgeted lower excise duties and this is the big chunk of the oil price component. The retail oil price component. The impact into in late November when oil prices started to climb. The government had got excise duties on goods of petrol and diesel quite sharply. But since then of course they've held prices steady and we've seen a surge in global prices. So there is a possibility that they will have to cut the prices cut the excise duties again in order to soften the price impact of higher retail prices. This comes at this complicated time because India is in fact going to undershoot by a vey light margin. It's a state sales target which was imports of essential component of its fiscal revenues. The allies see IPO that was scheduled to go through in March is now being delayed because of all the market volatility. Yeah we've seen the market volatility play into the rupee too. But at the same time you now have the Fed starting to raise rates. We know that that plays through into other economies as well I guess. What is the impact you're expecting on capital flows. The India has in fact been among the laggards in terms of normalizing monetary policy. And we have seen that over the last five six months there have been four in our stores. And that of course along with oil prices is leading to currency depreciation. In fact the rupee had hit an all time low just last week. So almost 77 to the dollar. Of course we do have large fixed reserves and the RBI is said to be intervening in the efforts markets just within volatility. But you know all the negatives right now are stacked up against India macro not as much as we have seen in in the previous oil price surge episodes. But of course right now things are looking a little negative for India. Should we do. Just breaking here. If India does get a go ahead with this rupee ruble trade how would that affect Indian companies. It could also perhaps invoke the anger of other nations there as well. And what does it mean for country companies trying to raise funds abroad. Yes that in fact has already been receiving criticism for abstaining toward at the at the U.N. against Russia's invasion of Ukraine. So I think that June of this we will of course have to see whether this would be the world trade goods too because they have to figure out how to effect the currencies. But I think that you know it is it depends on how the other countries react to it in terms of any secondary sanctions are a thing that they do hit out against India for going ahead with this deal with Russia. We have seen in the Indian news just some recently that the Indian oil got as one discounted Russian oil. So we are going to have to see how it's unpredictable what we're going to have to see how things play out. It's hard to say at this point in time.

No schedule data available.

Deveshwar: India's Growth To Slow In 2H/FY23

TS Lombard India Research Senior Director Shumita Deveshwar expects India’s GDP growth momentum to slow following a 1H/FY23 jump, driven by base effects. She was speaking with Juliette Saly and Rishaad Salamat on "Bloomberg Markets: Asia". (Source: Bloomberg)

More From Bloomberg Markets
All episodes and clips