HSBC Chief India Economist Pranjul Bhandari Discusses RBI Decision

The transcript discusses the Reserve Bank of India's (RBI) current policy stance, focusing on growth concerns and the potential impact of a third COVID-19 wave. It highlights inflation concerns, noting that inflation has been above the target for 21 months. The RBI is expected to start a gradual normalization path in late 2021, focusing on liquidity and inflation. The risks of stagflation and the challenges of inflation targeting are also discussed. The impact of interest rates on India's informal economy and the limited efficacy of monetary policy in such a context are examined.

What is one reason the RBI is hesitant to change its monetary policy stance?

• Increased banking sector stability

• Strong economic growth

• Concerns about a third wave of COVID-19

• High inflation rates

What is the RBI's inflation target?

• 8%

• 6%

• 4%

• 2%

What is one of the key areas the RBI is focusing on in its commentary?

• Interest rate hikes

• Liquidity and inflation concerns

• Banking sector reforms

• Foreign exchange reserves

What percentage of India's labor force is in the formal sector?

• 20%

• 10%

• 50%

• 80%

How have low interest rates impacted the formal sector in India?

• Reduced housing loans

• Facilitated corporate deleveraging

• Decreased corporate borrowing

• Increased inflation