C Rangarajan, veteran economist who chairs the Prime Minister’s Economic Advisory Council, expects industrial growth to pick up from this month, he tells Indivjal Dhasmana. A short and edited interview:
Industrial growth bounced back in November, from contraction in October. What is your outlook for the remaining months of this financial year, particularly considering the high base effect of December?
Some moderation could be seen in December. However, industrial growth will pick up after that, which will have ramifications for overall economic growth. I expect overall economic growth to be over seven per cent this fiscal (the economy grew 7.3 per cent in the first half).
What does the November industrial growth figure tell RBI in terms of policy response?
RBI’s policy actions will depend on the headline inflation number for December. While food inflation is in the negative zone, we are not sure about the rate of price rise in manufactured products. So, this will give an important indicator to the central bank.
Many economists have suggested RBI wait a bit longer before cutting policy rates and choose the cash reserve ratio (CRR) or open market operations (OMOs) to manage liquidity. What would you suggest?
I think OMOs are a preferred tool, because you can calibrate liquidity management this way. CRR is somewhat a blunt tool. Even a quarter of a percentage point cut in CRR unleashes a great amount of liquidity in the system.
Mining continued to witness a contraction in November production , for the fourth month in a row. Do you see it as a drag?
Mining will improve from December. Coal production has picked up in December.
Capital goods also witnessed a continued fall in November. Will it affect future industrial growth?
The decline in capital goods abated somewhat in November. Their production will improve in the months to come.
