Inflation may push up more on weather cues: Richard Iley

ET Now caught up with Richard Iley, Chief Economist Asia, BNP Paribas, to find out his views on inflation levels.

We would like you to talk about GDP growth slowing down a little in the December quarter because of the drought that we saw last year, industrial production beginning to slowdown but still act at elevated levels and if you see inflation now, it is still quite elevated on both consumer price and wholesale price. Inflation still at very elevated levels although we see a small downtick coming in there don't know if its going to sustain, some people saying second half of the year is going to be better from an inflation perspective but what is your sense, is the RBI falling behind the curve?

I think inflation could have pushed up right slightly more quickly than its down. I think its understandable in the very short term immediate environment it wants to take more overweight and see approach, but we can really think about the inflation and like it has been conditioned by three factors. You have obviously got the weather and the imminent monsoon and the outlook for food prices we know that certainly the initial pick up in inflation that you showed in your chart very much of food price phenomenon. The second factor is the global outlook particularly commodity prices. Domestic factors the extent to which generalise demand push pressures on inflation are emerging and been evident for 6 months. The RBI itself is now admitted in its monetary policy reviews that it sees those generalised demand push pressure is building and so its really trying to balance the interplay of those three factors point out to be making. You cannot control the weather, to some extent you cannot control the global price of oil. So if you are setting policy accordingly just the domestic macrofundamentals without wanting to gamble on unnecessarily good monsoon, then interest rate should be a little bit tightened. Because where we are now on policy right is probably a little bit sounds of neutral and I would like just be saying right as the economy normalises push more up towards that neutral level may be 6% on the repo rate.