No comment on RBI policy, but see US Fed pausing in June: CEA Nageswaran

The RBI left the repo rate changed in April after hiking it by 250 basis points to 6.5 percent in 2022-23.

The US Federal Reserve may not increase interest rates again in its meeting in June, Chief Economic Adviser V Anantha Nageswaran has said.

"I think they (US Fed) have given the indication that they would be on pause in June," Nageswaran said on May 25 at the CII Annual Session in New Delhi.

"And I also don't believe that in the US case, rate cuts are imminent. I don't think so. Unless of course there are further financial accidents like we saw in March and April because if you look at the macro data, they are still holding up pretty well. So I think stable for longer might be more likely than looser policy, but that's my personal view," he added.

When quizzed on what the Reseve Bank of India (RBI) might do at its own meeting next month, the government's top economist refused to comment.

"I have always said in my last 16 months in this job that I don't comment on (Indian) monetary policy in public. So I am not going to change that stance," he said.

While the RBI's Monetary Policy Committee is scheduled to meet June 6-8, the US Federal Open Market Committee will meet a week later from June 13-14.

The RBI left the repo rate changed in April after hiking it by 250 basis points to 6.5 percent in 2022-23. While the central bank has maintained that it has only taken a pause to see the impact of it's past rate hikes and policy has not pivoted, markets participants are of the view that the rate hike cycle has come to an end.

Meanwhile, the Fed is expected to leave the federal funds rate target range unchanged at 5-5.25 percent next month.

Nageswaran also reiterated his concerns about energy security being a key risk to India's growth outlook.

"(For) India, if there is a single-most important worry in my mind for sustaining the growth rate that we have been able to achieve in the last 2-3 years, it is energy security," the chief economic adviser said.

According to Nageswaran, India cannot "completely swear off fossil fuels" as they - if not coal, then gas and others - had a role to play even as the government tries to balance the proportion of non-fossil fuels and fossil fuels in the country's energy mix.

"Therefore, if the financial industry completely avoids funding fossil fuel-based power generation projects, then we will be placing in jeopardy economic growth. And if we place economic growth in jeopardy, then the generation of fiscal and private sector resources will also will also be in jeopardy and therefore our ability to provide the right mind of financing for dealing with climate change will also be in doubt," Nageswaran warned.