RBI's move was on expected lines: Saumitra Chaudhuri

Interview with Member of the Planning Commission, PMEAC

Saumitra Chaudhuri, member of the Planning Commission and the Prime Minister’s Economic Advisory Council, is one of the government’s troubleshooter for vexed economic problems. After Reserve Bank of India (RBI) Governor D Subbarao opposed the issuance of a sovereign bond, Chaudhuri, also one of those being considered for the top job at RBI, tells Sanjeeb Mukherjee quasi-sovereign bonds by a few public sector entities could help fund infra projects. Edited excerpts:

RBI Governor D Subbarao says issuing a sovereign bond wouldn’t help much, as its costs would outweigh the benefits at this juncture. Do you agree?

The issue of a sovereign bond has several implications, including the fact that it is an irrevocable process. In the past, we didn’t have a sovereign bond issue for these reasons. However, there have been bond issuances, such as the RIB (Resurgent India Bond), which is quasi-sovereign in nature. Moreover, several public sector companies regularly raise bonds in foreign markets and these, too, have a quasi-sovereign character. It is possible to consider additional issuance of this type of bonds, especially to fund infrastructure projects.

In its monetary policy review on Tuesday, RBI kept the policy rate and the cash reserve ratio unchanged. What is your take on this?

This was according to expectations. In recent weeks, interest rate interventions for dealing with the foreign exchange problem have been at the shortest end of the yield curve; it was logical that no inference should have been drawn from these steps for the overall policy rates.

RBI scaled down its 2013-14 growth projection from 5.7 per cent to 5.5 per cent. What is your estimate?

As things stand, a range between 5.5 per cent and six per cent looks reasonable, amid expectations of some pick-up in economic activity in the second half of this financial year.

RBI said it had to deal with the classic impossible trinity, as external factors were combined with inflation and growth.

The only trinity I believe in is the Divine. Human-made obstacles have human solutions.