Paul Krugman says RBI should cut rates

MUMBAI: Noble price winning economist Paul Krugman thinks monetary policy is too tight in India despite a sharp fall in inflation.

Krugman also suggested that India's fiscal policy can afford some expansion to support the country's GDP.

"I don't why the monetary policy in India is so tight if we have such inflation performance we will be looking at looser monetary policies," Krugman was speaking at SBI's fourth banking and economics conclave.

India's retail inflation has fallen to 2.18% in May from 2.99% in April mainly as food prices eased.

The fall is contrarory to the stance by the RBI which has paused rate cuts citing possibility of rise in prices.

"Now that an international economist like Krugman has said rates should go down may be the RBI will listen because it is so far not heard pleas by local economists like us," said a foreign bank economist on the condition of anonymity.

Local economists are calling for at least a 25 basis points cut when RBI meets for its policy review next month.