New lessons in managing inflation in the West: KV Kamath

KV Kamath, former chief of the New Development Bank of BRICS countries, spoke exclusively to Network18 over a number of issues. Here are edited excerpts:

KV: Every time inflation rises, it is a concern. We need to understand what is behind rising inflation - the structural elements and then take appropriate and calibrated measures, which the Reserve Bank (of India) has been doing over the last two years as you’ve seen inflation fluctuate. And, I’m sure they will. There are important lessons now on how global inflation is being handled. And, the question that is being raised: is there a connect between interest rates and inflation? It may be somewhat of a theoretical question. But, I think, that will be an interesting question, which I’m sure we’ll answer in the right way.

NW18: RBI so far has refrained from starting to hike rates although it changed the stance now to sort of assert that inflation is priority rather than growth. Would you still see the RBI as behind the curve and not starting to tighten yet?

KV: The events of the last few years have thrown up a whole lot of equations, which need to be resolved or solved. In both Europe and the US, inflation is nudging 8 percent or over 8 percent. And, the interest rate in the Eurozone is near zero while, in Europe, it is 2 percent. Clearly, new lessons are being taught as to how we should manage inflation in their economies. I’m sure we’ll also understand how we could do it without really disturbing the growth process. I think it’s an interesting challenge to balance - inflationary challenges with growth challenges.