Fiscal consolidation key to check rates, inflation: Expert

Below is an edited transcript of the analysis on CNBC-TV18.

Q: Is Chidambaram overtly directing the RBI to cut rates?

A: Yes. But Chidambaram did not enquire why the interest rates were so high. The interest rates are high because of government over-borrowing and lack of fiscal consolidation.

It seems that the finance minister had gone wrong with his equations because it is not possible to protect the consumer with a rate of interest that's lower than the rate of inflation.

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Q: Will another committee be able to aid the government rein-in the fiscal deficit, cut diesel and fertiliser subsidies, and other expenditure?

A: I think it's dangerous to keep pushing decisions aside. I don't think you need another committee with an election Budget round the corner in February. The government has three-to-four months to kick-start fiscal consolidation to enable some gains in the next six months and ensure there is some money to spare in the election year.

Q: Did the finance minister sent the right signals regarding retrospective amendments in address this afternoon?

A: I think the finance minister has sent the right signals. I think, at the moment, the government has to try and work out a compromise with Vodafone which might involve payment of some of the taxes. But for that the government will have to make some amendments to the law, which, in my opinion, is unlikely to happen soon.

Q: So, in your opinion, it is too early to judge what the finance minister will actually be able to deliver on. But what do you make of the finance minister's address?

A: Chidambaram in the finance ministry is a source of comfort for everybody including the market and investors. But his statements about taking calibrated risks regarding interest rates, instead of initiating fiscal consolidation, are worrisome.