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00:00What's your take on this rupee weakness. What does it mean for the Reserve Bank and indeed what does it mean now fundamentally for inflation as well. Thank you. Well certainly it's a very challenging situation. We've fought moderate high on to go on deficit that we're begging for the C.R. at about hundred billion dollars which is a fresh high but it's just about two point ninety three percent of GDP. So that itself is not the alarming concern but it's more that equity outflows from the ISE on continuing unabated. And that's really adding to an artificial add on. That'll be we've seen a lot of new fresh laws and you know now Dada Danger Micro sort of for 84 USD although it also seems to be in sight. So far the Reserve Bank of India it's certainly going to complicate the inflation fight as well. And you know policy choices do seem to be rather difficult at this point in time. Well how would you deal with the weakening rupee. I mean just market forces dictated and just live with the consequences. What can you really do with it as well. Well you know as far as the foreign exchange is always a concern and yet still has very large foreign exchange reserves and we do expect that able to be deployed to some extent to be able to stem the rupee weakness. But if it's meant to be a secular thing then you know it's hard to sort of keep fighting against what's happening globally. The other major concern for India is what happens with low oil prices because we are one of the biggest oil import loans. And that's something that adds to our domestic pump prices that inflation outlook. And it you know higher fuel prices along with higher fuel prices really affect you know inflationary expectations in India. So we had a buffaloed also higher than our net make up people that may go your keys now unexciting fees on petrol and diesel up back to the deep endemic levels. So that sort of automatic buffet isn't there anymore. And any future increases in gold prices is therefore going to be a very negative sentiment driver that aside as the iron artist than on the current account deficit as well as the fiscal deficit. So that's another issue that really watching out for for the second half of the. RTS just taking a look what India is doing right now it is raising basic import tax on gold to twelve and a half percent and taking a look at where gold is trading right now down by three tenths of one percent. Eighteen a one is that level. We're looking at ADT. You talk about the weakness in the rupee. How low can the rupee go. We have the likes of Goldman saying I'll get to 80 81. But it's so close to that level already. You know our last call was that the law would be easy and I think you know we we are dangerously close to that right now. So we're going to be watching the next few days to really see if we sustainably stay above 79. We've broken the seventy nine handle and we need to see if that sort of identity blip at the end of the month or if that's something dark that sustains going ahead. I don't want to add that you know all news is bad. When we got the four to four which is the January to March it got into our deficit figured a few. You know less than 10 days ago it was actually lower than what we were expecting. So I have to add that all news coming out on needs done in the conference room yet isn't equally bad. Anyone for the CIA with crude oil or Indian basket rise or fall between hundred and hundred point. You told us about it. We're not expecting the Indian gotten to go in deficit to cross 3 percent of GDP because our sources exports are also very strong at this point in time. So I don't believe that there are some mitigating factors. I really am just wondering you have a seven point two percent growth target for India. What would put that at risk. OK so if commodity prices go up for them from these levels then I started eating that's going to be something that I bought seven point two percent growth target that just because either it's going to seep through into higher prices which is will affect demand or if the producers bite the bullet and not take a fall ahead on margins. And that something does also would reduce the value added growth. Also the Indian economy. So higher commodity prices particularly stemming from global factors is definitely one of the biggest risks that they're looking at especially things like crude oil edible oils you know things that very quickly transmit in to lots of different upward places.

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ICRA's Nayar on Indian Economy

Aditi Nayar, chief economist at ICRA Ltd, discusses the outlook for Indian economic recovery and the impact from global headwinds such as elevated commodity prices, rising inflation and tighter monetary conditions. She speaks on "Bloomberg Markets: Asia." (Source: Bloomberg)

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