If you look at the pricing in markets, there is the sense that the strait will open. Now, we are not going to see the price of oil come down all the way very quickly. You know, it's going to take probably till the middle of next year for oil to come back to say 70 or $75 a barrel. So, there is a there's going to be an effect lasting into next year. In terms of the impact on India, you know, there is an expectation that growth which is currently projected by the IMF at around 6 and a half percent will likely come down some more and come closer towards the 6% number because of these developments. But I mean we still are not seeing very big risks play out. I mean we're not seeing oil reaching 120, even $140 a barrel. So that's the good news. And if that were to happen, I think the consequences for the global economy would be much more severe.
In a recent book written by you, you have just underlined that the rupee should find its own level and it should stabilize on its own. So can you just broaden this thought? Do you think that RBI is using its reserves for stabilizing the rupee in a state?
I think RBI has handled this very well. They have let the rupee adjust, which it should do because we have a change in the international environment. What's happening in the Strait of Hormuz has consequences, therefore you should expect the currency to depreciate so that you get the adjustment that you need for the economy. RBI has been doing some amount of intervention, you know, to address disorderly market conditions, and that is perfectly fine to do. I think what you should avoid against is doing an intervention that keeps the currency from simply not moving at all, and that I think would be counterproductive because it will also make foreign investors hold off and not bring money into the country because they think the rupee is going to weaken again in the future once the intervention stops. So I think that the way it's being handled right now is appropriate.
Global interest rates are already very elevated and we are sticking to RBI again. RBI is to announce their bi-monthly policy tomorrow, that the new rates are to be announced. So do you see that RBI will increase their rates tomorrow?
You know, RBI is obviously trading off at this point the consequences for inflation that come with the higher oil prices and with the currency depreciation, but against what's happening in terms of economic activity. I mean I expect that in the near term the RBI will likely be on hold, but then eventually maybe in the future depending upon developments and what's happening with inflation they can respond. But again, going on a data-dependent approach is a useful thing to do. And on the one hand, while there is some inflationary pressure, at least we're not seeing that much in consumer price inflation also because there's not been that much pass-through of the higher oil prices into fuel prices at the pump. There's been some increase but not that much. On the other hand, you also do have the somewhat softening of economic activity.
What can the government do more to ease out the pain of the people due to the West Asia problems? Should we go for the reforms only or can some cash transfers also help? And essentially, what can the government pull out from its box to ease out the tensions which are among the population at the financial front?
I mean, the government is already to some extent supporting the economy because it has not let prices at the fuel pump go up by as much as one would expect it to given how much world oil prices have risen. You know, in fact the pass-through has been much lesser than what it is for many other countries. So that itself is like an implicit subsidy to households and companies. You know, what probably will be called for is to let more of the price increase pass through, but then have much more targeted support to vulnerable households and companies as opposed to broad-based support in terms of keeping fuel prices, you know, artificially low. So I think that at this current moment providing more targeted support is a good way to go. More generally, I think what would be helpful is doing further reforms in terms of improving the ease of doing business, having a positive story on AI in terms of the fact that AI can be net positive for India. These are the kinds of actions that would help increase interest in India as a destination for investment capital flows, and that would also take the pressure off the rupee.
On the supply side, it is worldwide very affected and it's in a very bad shape. The supply chain globally is very affected, and how can India, a country like India, stay resilient in the supply chain and different things?
Well, I think one of the areas of supply where India can do more is on the energy front. Shifting away from reliance on fossil fuel imports towards more reliance on, you know, renewable energies but also nuclear, that can help reduce the import bill and reduce the dependence on foreign supply chains. The more broader reorientation of trade that we are seeing, you know, also driven by geopolitics, can also be towards India's benefit because there are more countries that would look at diversifying their sources from which they buy, and India can be one place which could be providing inputs into the supply chain. It's good news that India is signing up more trade agreements, including with the European Union, that will also help make India play a bigger role in global supply chains than it is doing right now.
There is so much instability around the globe and still we are seeing the capital markets of the US and some East Asian countries, they're hitting their all-time highs at this time. So do you think that they're not actually accurately thinking about the risk of the West Asia crisis?
Now what's happening in the US and in Korea and in Taiwan is the AI story, right? So while on the one hand you do have the problem coming out of West Asia, but there's a huge AI boom right now happening in the US and in the countries that we just talked about that is driving up stock market valuations. There is certainly a risk that there is some exuberance, they are overdoing it, but given the expectations in terms of how transformative AI is going to be, there is huge enthusiasm for putting money in that particular sector, and that's the reason why despite everything else that's happening in the world there are these very, very high stock valuations.
You talked about AI. Do you think that AI has started putting its imprint on the global GDP? What is AI's GDP in the global economy?
AI is absolutely driving an important part of growth in, say, the US. If you look at the most recent quarter for growth in the US, I think about half of it is coming from AI, and it's coming because of AI investment — the, you know, building up of data centers, investment in chips, data processors and so on. You're seeing a large amount of investment, and that is an important driver of growth in the US. And since the US is a big part of the world economy, that has spillovers to the rest of the world. So absolutely, I mean, AI is an important driver for growth.
In a recent development, US Trade Act 301 has been made effective on India and some other countries. So how do you see the impact of Section 301 being imposed against India and other countries, and how is it going to affect the exports of India to the US?
This news just came out today in terms of the imposition of 301. There are still details that have to be determined about, you know, what it will take for India to come off the 301 list as opposed to being slapped with additional tariffs. I mean, these tariffs are not just consequential for India, but they're consequential for the US. We have seen inflation be higher because of the tariffs that have been put on all imports coming into the US. So this is a problem even for the US. It is reducing trade between the countries that you have these high tariffs on. It is obviously a negative for countries that get slapped with a higher amount of tariffs. But I think what we've learned from 2025 is that when it comes to US trade policy, there's nothing very predictable about it and it appears to be fluctuating over time. So again, I think we need to wait to see what the actual details are in terms of what this 301 ruling means. What precisely will be the tariff rate on India?
We all are expecting that things stabilize as fast as they can. But we are seeing escalations also in some part of West Asia, like Israel is still continuing with Lebanon, and last night we saw Iran attack some of the US allies. So it's not going to end very soon. So is it going to go very long according to you, and how do you see the impact of a long-term war on all countries — not only the US, India or some major countries, but all other countries?
I think there's still a very high level of uncertainty about how this war will play out. I do worry that markets are not pricing in sufficiently this risk of a prolonged war in West Asia. If this continues for another month, we're looking at oil prices that could go up to like $120 and $140 a barrel and could stay there for much longer. In that scenario, we could have global growth, which is now projected at 3.1%, going down to say 2.5% and even closer to 2%. I think that risk very much exists even if it's not being priced in markets right now because there is still the optimism that there will be a deal and that this situation will resolve relatively quickly. Different parts of the world are being affected differently by it, and like I said, the AI story is offsetting the negativity that's coming from these developments in West Asia for some countries in the world.
Thank you. What further implications will there be on India's macro numbers, and are there any specific indicators that are getting close to the danger zone according to you?
I mean, as of now there is still very much the expectation that this conflict will end quickly, and there are negotiations happening right now between Iran and the US. If you look at the pricing in markets, there is the sense that the strait will open. Now, we are not going to see the price of oil come down all the way very quickly. You know, it's going to take probably till the middle of next year for oil to come back to say 70 or $75 a barrel. So, there is a there's going to be an effect lasting into next year. In terms of the impact on India, you know, there is an expectation that growth which is currently projected by the IMF at around 6 and a half percent will likely come down some more and come closer towards the 6% number because of these developments. But I mean we still are not seeing very big risks play out. I mean we're not seeing oil reaching 120, even $140 a barrel. So that's the good news. And if that were to happen, I think the consequences for the global economy would be much more severe.
In a recent book written by you, you have just underlined that the rupee would find its own level and it should stabilize on its own. So can you just broaden this thought? Do you think that RBI is using its reserves for stabilizing the rupee?
I think RBI has handled this very well. They have let the rupee adjust, which it should do because we have a change in the international environment. What's happening in the Strait of Hormuz has consequences, therefore you should expect the currency to depreciate so that you get the adjustment that you need for the economy. RBI has been doing some amount of intervention, you know, to address disorderly market conditions, and that is perfectly fine to do. I think what you should avoid against is doing an intervention that keeps the currency from simply not moving at all, and that I think would be counterproductive because it will also make foreign investors hold off and not bring money into the country because they think the rupee is going to weaken again in the future once the intervention stops. So I think that the way it's being handled right now is appropriate.
Global interest rates are already very elevated and we are sticking to RBI again. RBI is to announce their bi-monthly policy tomorrow, rates are to be announced. So do you see that RBI will increase their rates tomorrow?
RBI is obviously trading off at this point the consequences for inflation that come with the higher oil prices and with the currency depreciation. But against what's happening in terms of economic activity, I mean I expect that in the near term the RBI will likely be on hold, but then eventually maybe in the future depending upon developments and what's happening with inflation they can respond. But again, going on a data-dependent approach is a useful thing to do. And on the one hand, while there is some inflationary pressure, at least we're not seeing that much in consumer price inflation also because there's not been that much pass-through of the higher oil prices into fuel prices at the pump. There's been some increase but not that much. On the other hand, you also do have the somewhat softening of economic activity. And so therefore, maybe waiting for more data to see what's happening to inflation, what's happening to economic activity before raising rates is probably one approach to take.
The West Asia problem is affecting the Indian population on multiple levels — not only the energy crisis but on other fronts also. So what can the government do more to ease out the pain of the people due to the West Asia problems? Should we go for the reforms only or can some cash transfers also help? And essentially, what can the government pull out from its box to ease out the tensions which are among the population at the financial front?
I mean, the government is already to some extent supporting the economy because it has not let prices at the fuel pump go up by as much as one would expect it to given how much world oil prices have risen. In fact, the pass-through has been much lesser than what it is for many other countries. So that itself is like an implicit subsidy to households and companies. You know, what probably will be called for is to let more of the price increase pass through, but then have much more targeted support to vulnerable households and companies as opposed to broad-based support in terms of keeping fuel prices, you know, artificially low. So I think that at this current moment providing more targeted support is a good way to go. More generally, I think what would be helpful is doing further reforms in terms of improving the ease of doing business, having a positive story on AI in terms of the fact that AI can be net positive for India. These are the kinds of actions that would help increase interest in India as a destination for investment capital flows, and that would also take the pressure off the rupee.
On the supply side, it is worldwide very affected and it's in a very bad shape. The supply chain globally is very affected, and how can India, a country like India, stay resilient in the supply chain and related things?
Well, I think one of the areas of supply where India can do more is on the energy front. Shifting away from reliance on fossil fuel imports towards more reliance on, you know, renewable energies but also nuclear, that can help reduce the import bill and reduce the dependence on foreign supply chains. The more broader reorientation of trade that we are seeing, you know, also driven by geopolitics, can also be towards India's benefit because there are more countries that would look at diversifying their sources from which they buy, and India can be one place which could be providing inputs into the supply chain. It's good news that India is signing up more trade agreements, including with the European Union, that will also help make India play a bigger role in global supply chains than it is doing right now.
Now there is so much instability around the globe and still we are seeing the capital markets of the US and some East Asian countries, they're hitting their all-time highs at this time. So do you think that they're not actually accurately thinking about the risk of the West Asia crisis?
Now what's happening in the US and in Korea and in Taiwan is the AI story, right? So while on the one hand you do have the problem coming out of West Asia, but there's a huge AI boom right now happening in the US and in the countries that we just talked about that is driving up stock market valuations. There is certainly a risk that there is some exuberance, they are overdoing it, but given the expectations in terms of how transformative AI is going to be, there is huge enthusiasm for putting money in that particular sector, and that's the reason why despite everything else that's happening in the world there are these very high stock valuations.
You talked about AI. Do you think that AI has started putting its influence on the global GDP? What is AI's GDP in the global economy?
AI is absolutely driving an important part of growth in, say, the US. If you look at the most recent quarter for growth in the US, I think about half of it is coming from AI, and it's coming because of AI investment — the, you know, building up of data centers, investment in chips, data processors and so on. You've seen a large amount of investment, and that is an important driver of growth in the US. And since the US is a big part of the world economy, that has spillovers to the rest of the world. So absolutely, I mean, AI is an important driver for growth.
In a recent development, US Trade Act 301 has been made effective on India and some other countries. So how do you see the impact of Section 301 being imposed against India and other countries, and how is it going to affect the exports of India to the US?
This news just came out today in terms of the imposition of 301. There are still the details that have to be determined about, you know, what it will take for India to come off the 301 list as opposed to being slapped with additional tariffs. I mean, these tariffs are not just consequential for India, but they're consequential for the US. We have seen inflation be higher because of the tariffs that have been put on all imports coming into the US. So this is a problem even for the US. It is reducing trade between the countries that you have these high tariffs on. It is obviously a negative for countries that get slapped with a higher amount of tariffs. But I think what we've learned from 2025 is that when it comes to US trade policy, there's nothing very predictable about it and it appears to be fluctuating over time. So again, I think we need to wait to see what the actual details are in terms of what this 301 ruling means. What precisely will be the tariff rate on India?
We all are expecting that things stabilize as fast as they can, but we are seeing escalations also in some part of West Asia, like Israel is still continuing with Lebanon, and last night we saw Iran attack some of the US allies. So it's not going to end very soon. So is it going to go very long according to you, and how do you see the impact of a long-term war on all countries — not only the US, India or some major countries, but all other countries?
I think there's still a very high level of uncertainty about how this war will play out. I do worry that markets are not pricing in sufficiently this risk of a prolonged war in West Asia. If this continues for another month, we're looking at oil prices that could go up to like $120 and $140 a barrel and could stay there for much longer. In that scenario, we could have global growth, which is now projected at 3.1%, going down to say 2.5% and even closer to 2%. I think that risk very much exists even if it's not being priced in markets right now because there is still the optimism that there will be a deal and that this situation will resolve relatively quickly. Different parts of the world are being affected differently by it, and like I said, the AI story is offsetting the negativity that's coming from these developments in West Asia for some countries in the world.
Thank you. What further implications will there be on India's macro numbers, and are there any specific indicators that are getting close to the danger zone according to you?
I mean, as of now there is still very much the expectation that this conflict will end quickly, and there are negotiations happening right now between Iran and the US. If you look at the pricing in markets, there is the sense that the strait will open. Now we are not going to see the price of oil come down all the way very quickly. You know, it's going to take probably till the middle of next year for oil to come back to say 70 or $75 a barrel. So there is a there's going to be an effect lasting into next year. In terms of the impact on India, you know, there is an expectation that growth which is currently projected by the IMF at around 6 and a half percent will likely come down some more and come closer towards the 6% number because of these developments. But I mean we still are not seeing very big risks play out. I mean we're not seeing oil reaching 120, even $140 a barrel. So that's the good news. If that were to happen, I think the consequences for the global economy would be much more severe.
In a recent book written by you, you have just underlined that the rupee should find its own level and it should stabilize on its own. So can you just broaden this thought? Do you think that RBI is using its reserves for stabilizing the rupee?
I think RBI has handled this very well. They have let the rupee adjust, which it should do because we have a change in the international environment. What's happening in the Strait of Hormuz has consequences. Therefore, you should expect the currency to depreciate so that you get the adjustment that you need for the economy. RBI has been doing some amount of intervention, you know, to address disorderly market conditions, and that is perfectly fine to do. I think what you should avoid against is doing an intervention that keeps the currency from simply not moving at all, and that I think would be counterproductive because it will also make foreign investors hold off and not bring money into the country because they think the rupee is going to weaken again in the future once the intervention stops. So I think that the way it's being handled right now is appropriate.
Global interest rates are already very elevated and we're sticking to RBI again. RBI is to announce their bi-monthly policy tomorrow, when new rates are to be announced. So do you see that RBI will increase their rates tomorrow?
You know, RBI is obviously trading off at this point the consequences for inflation that come with the higher oil prices and with the currency depreciation. But against what's happening in terms of economic activity, I mean I expect that in the near term the RBI will likely be on hold, but then eventually maybe in the future depending upon developments and what's happening with inflation they can respond. But again, going on a data-dependent approach is a useful thing to do. And on the one hand, while there is some inflationary pressure, at least we're not seeing that much in consumer price inflation also because there's not been that much pass-through of the higher oil prices into fuel prices at the pump. There's been some increase, but not that much. On the other hand, you also do have the somewhat softening of economic activity. And so therefore maybe waiting for more data to see what's happening to inflation, what's happening to economic activity before raising rates is probably one approach to take.
The West Asia problem is affecting the Indian population on multiple levels — not only the energy crisis but on other fronts also. So what can the government do more to ease out the pain of the people due to the West Asia problems? Should we go for the reforms only or can some cash transfers also help? And essentially, what can the government pull out from its box to ease out the tensions which are among the population at the financial front?
I mean, the government is already to some extent supporting the economy because it has not let prices at the fuel pump go up by as much as one would expect it to given how much world oil prices have risen. In fact, the pass-through has been much lesser than what it is for many other countries. So that itself is like an implicit subsidy to households and companies. You know, what probably will be called for is to let more of the price increase pass through, but then have much more targeted support to vulnerable households and companies as opposed to broad-based support in terms of keeping fuel prices, you know, artificially low. So I think that at this current moment providing more targeted support is a good way to go. More generally, I think what would be helpful is doing further reforms in terms of improving the ease of doing business, having a positive story on AI in terms of the fact that AI can be net positive for India. These are the kinds of actions that would help increase interest in India as a destination for investment capital flows, and that would also take the pressure off the rupee.
On the supply side, it is worldwide very affected and it's in a very bad shape. The supply chain globally is very affected, and how can India, a country like India, stay resilient in the supply chain and different things?
Well, I think one of the areas of supply where India can do more is on the energy front. Shifting away from reliance on fossil fuel imports towards more reliance on, you know, renewable energies but also nuclear, that can help reduce the import bill and reduce the dependence on foreign supply chains. The more broader reorientation of trade that we're seeing, you know, also driven by geopolitics, can also be towards India's benefit because there are more countries that would look at diversifying their sources from which they buy, and India can be one place which could be providing inputs into the supply chain. It's good news that India is signing up more trade agreements, including with the European Union, that will also help make India play a bigger role in global supply chains than it is doing right now.
There is so much instability around the globe and still we are seeing the capital markets of the US and some East Asian countries, they're hitting their all-time highs at this time. So do you think that they're not actually accurately thinking about the risk of the West Asia crisis?
Now what's happening in the US and in Korea and in Taiwan is the AI story, right? So while on the one hand you do have the problem coming out of West Asia, but there's a huge AI boom right now happening in the US and in the countries that we just talked about that is driving up stock market valuations. There is certainly a risk that there is some exuberance, we are overdoing it, but given the expectations in terms of how transformative AI is going to be, there is huge enthusiasm for putting money in that particular sector, and that's the reason why despite everything else that's happening in the world there are these very high stock valuations.
You talked about AI. Do you think that AI has started putting its imprint on the global GDP? What is AI's GDP in the global economy?
AI is absolutely driving an important part of growth in, say, the US. If you look at the most recent quarter for growth in the US, I think about half of it is coming from AI, and it's coming because of AI investment — the, you know, building up of data centers, investment in chips, data processors and so on. You're seeing a large amount of investment, and that is an important driver of growth in the US. And since the US is a big part of the world economy, that has spillovers to the rest of the world. So absolutely, I mean, AI is an important driver for growth.
In a recent development, US Trade Act 301 has been made effective on India and some other countries. So how do you see the impact of Section 301 being imposed against India and other countries, and how is it going to affect the exports of India to the US?
This news just came out today in terms of the imposition of 301. There are still details that have to be determined about, you know, what it will take for India to come off the 301 list as opposed to being slapped with additional tariffs. I mean, these tariffs are not just consequential for India, but they're consequential for the US. We have seen inflation be higher because of the tariffs that have been put on all imports coming into the US. So this is a problem even for the US. It is reducing trade between the countries that you have these high tariffs on. It is obviously a negative for countries that get slapped with a higher amount of tariffs. But I think what we've learned from 2025 is that when it comes to US trade policy, there's nothing very predictable about it and it appears to be fluctuating over time. So again, I think we need to wait to see what the actual details are in terms of what this 301 ruling means. What precisely will be the tariff rate on India?
We all are expecting that things stabilize as fast as they can. But we are seeing escalations also in some part of West Asia, like Israel is still continuing with Lebanon, and last night we saw Iran attack some of the US allies. So it's not going to end very soon. So is it going to go very long according to you, and how do you see the impact of a long-term war on all countries — not only the US, India or some major countries, but all other countries?
I think there's still a very high level of uncertainty about how this war will play out. I do worry that markets are not pricing in sufficiently this risk of a prolonged war in West Asia. If this continues for another month, we're looking at oil prices that could go up to like $120 and $140 a barrel and could stay there for much longer. In that scenario, we could have global growth, which is now projected at 3.1%, going down to say 2.5% and even closer to 2%. I think that risk very much exists even if it's not being priced in markets right now because there is still the optimism that there will be a deal and that this situation will resolve relatively quickly. Different parts of the world are being affected differently by it, and like I said, the AI story is offsetting the negativity that's coming from these developments in West Asia for some countries in the world.
Thank you. What further implications will there be on India's macro numbers, and are there any specific indicators that are getting close to the danger zone according to you?
I mean, as of now there is still very much the expectation that this conflict will end quickly, and there are negotiations happening right now between Iran and the US. If you look at the pricing in markets, there is the sense that the strait will open. Now, we are not going to see the price of oil come down all the way very quickly. You know, it's going to take probably till the middle of next year for oil to come back to say 70 or $75 a barrel. So, there is a there's going to be an effect lasting into next year. In terms of the impact on India, you know, there is an expectation that growth which is currently projected by the IMF at around six and a half percent will likely come down some more and come closer towards the 6% number because of these developments. But I mean we still are not seeing very big risks play out. I mean we're not seeing oil reaching 120, even $140 a barrel. So that's the good news. And if that were to happen, I think the consequences for the global economy would be much more severe.
In a recent book written by you, you have just underlined that the rupee would find its own level and it should stabilize on its own. So can you just broaden this thought? Do you think that RBI is using its reserves for stabilizing the rupee?
I think RBI has handled this very well. They have let the rupee adjust, which it should do because we have a change in the international environment. What's happening in the Strait of Hormuz has consequences. Therefore, you should expect the currency to depreciate so that you get the adjustment that you need for the economy. RBI has been doing some amount of intervention, you know, to address disorderly market conditions, and that is perfectly fine to do. I think what you should avoid against is doing an intervention that keeps the currency from simply not moving at all, and that I think would be counterproductive because it will also make foreign investors hold off and not bring money into the country because they think the rupee is going to weaken again in the future once the intervention stops. So I think that the way it's being handled right now is appropriate.
Global interest rates are already very elevated and we are sticking to RBI again. RBI is to announce their bi-monthly policy tomorrow, when the new rates are to be announced. So do you see that RBI will increase their rates tomorrow?
You know, RBI is obviously trading off at this point the consequences for inflation that come with the higher oil prices and with the currency depreciation, but against what's happening in terms of economic activity. I mean I expect that in the near term the RBI will likely be on hold, but then eventually maybe in the future depending upon developments and what's happening with inflation they can respond. But again, going on a data-dependent approach is a useful thing to do. And on one hand, while there is some inflationary pressure, at least we're not seeing that much in consumer price inflation also because there's not been that much pass-through of the higher oil prices into fuel prices at the pump. There's been some increase but not that much. On the other hand, you also do have the somewhat softening of economic activity, and so therefore maybe waiting for more data to see what's happening to inflation, what's happening to economic activity before raising rates is probably one approach to take.
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Households and companies. You know, what probably will be called for is to let more of the price increase pass through, but then have much more targeted support to vulnerable households and companies as opposed to broad-based support in terms of keeping fuel prices, you know, artificially low. So I think that at this current moment providing more targeted support is a good way to go. More generally, I think what would be helpful is doing further reforms in terms of improving the ease of doing business, having a positive story on AI in terms of the fact that AI can be net positive for India. These are the kinds of actions that would help increase interest in India as a destination for investment capital flows, and that would also take the pressure off the rupee.
On the supply side, it is worldwide very affected and it's in a very bad shape. The supply chain globally is very affected, and how can India, a country like India, stay resilient in the supply chain and different things?
Well, I think one of the areas of supply where India can do more is on the energy front. Shifting away from reliance on fossil fuel imports towards more reliance on, you know, renewable energies but also nuclear, that can help reduce the import bill and reduce the dependence on foreign supply chains. The more broader reorientation of trade that we're seeing, you know, also driven by geopolitics, can also be towards India's benefit because there are more countries that would look at diversifying their sources from which they buy, and India can be one place which could be providing inputs into the supply chain. It's good news that India is signing up more trade agreements, including with the European Union, that will also help make India play a bigger role in global supply chains than it is doing right now.
There is so much instability around the globe and still we are seeing the capital markets of the US and some East Asian countries, they're hitting their all-time highs at this time. So do you think that they're not actually accurately thinking about the risk of the West Asia crisis?
Now what's happening in the US and in Korea and in Taiwan is the AI story, right? So while on the one hand you do have the problem coming out of West Asia, but there's a huge AI boom right now happening in the US and in the countries that we just talked about that is driving up stock market valuations. There is certainly a risk that there is some exuberance, they're overdoing it, but given the expectations in terms of how transformative AI is going to be, there is huge enthusiasm for putting money in that particular sector, and that's the reason why despite everything else that's happening in the world there are these very high stock valuations.
As you talked about AI, do you think that AI has started putting its imprint on the global GDP? What is AI's GDP in the global economy?
AI is absolutely driving an important part of growth in, say, the US. If you look at the most recent quarter for growth in the US, I think about half of it is coming from AI, and it's coming because of AI investment — the, you know, building up of data centers, investment in chips, data processors and so on. You've seen a large amount of investment, and that is an important driver of growth in the US. And since the US is a big part of the world economy, that has spillovers to the rest of the world. So absolutely, I mean, AI is an important driver for growth.
In a recent development, US Trade Act 301 has been made effective on India and some other countries. So how do you see the impact of Section 301 being imposed against India and other countries, and how is it going to affect the exports of India to the US?
This news just came out today in terms of the imposition of 301. There are still details that have to be determined about, you know, what it will take for India to come off the 301 list as opposed to being slapped with additional tariffs. I mean, these tariffs are not just consequential for India, but they're consequential for the US. We have seen inflation be higher because of the tariffs that have been put on all imports coming into the US. So this is a problem even for the US. It is reducing trade between the countries that you have these high tariffs on. It is obviously a negative for countries that get slapped with a higher amount of tariffs. But I think what we've learned from 2025 is that when it comes to US trade policy, there's nothing very predictable about it and it appears to be fluctuating over time. So again, I think we need to wait to see what the actual details are in terms of what this 301 ruling means. What precisely will be the tariff rate on India?
We all are expecting that things stabilize as fast as they can. But we are seeing escalations also in some part of West Asia, like Israel is still continuing with Lebanon, and last night we saw Iran attack some of the US allies. So it's not going to end very soon. So is it going to go very long according to you, and how do you see the impact of a long-term war on all countries — not only the US, India or some major countries, but all other countries?
I think there's still a very high level of uncertainty about how this war will play out. I do worry that markets are not pricing in sufficiently this risk of a prolonged war in West Asia. If this continues for another month, we're looking at oil prices that could go up to like $120 and $140 a barrel and could stay there for much longer. In that scenario, we could have global growth, which is now projected at 3.1%, going down to say 2.5% and even closer to 2%. I think that risk very much exists even if it's not being priced in markets right now because there is still the optimism that there will be a deal and that this situation will resolve relatively quickly. Different parts of the world are being affected differently by it, and like I said, the AI story is offsetting the negativity that's coming from these developments in West Asia for some countries in the world.
Thank you. What further implications will there be on India's macro numbers, and are there any specific indicators that are getting close to the danger zone according to you?
I mean, as of now there is still very much the expectation that this conflict will end quickly, and there are negotiations happening right now between Iran and the US. If you look at the pricing in markets, there is the sense that the strait will open. Now, we are not going to see the price of oil come down all the way very quickly. You know, it's going to take probably till the middle of next year for oil to come back to say 70 or $75 a barrel. So, there is a there's going to be an effect lasting into next year. In terms of the impact on India, you know, there is an expectation that growth which is currently projected by the IMF at around 6 and a half percent will likely come down some more and come closer towards the 6% number because of these developments. But I mean, we still are not seeing very big risks play out. I mean, we're not seeing oil reaching 120, even $140 a barrel. So, that's the good news. And if that were to happen, I think the consequences for the global economy would be much more severe.
In a recent book written by you, you have just underlined that the rupee should find its own level and it should stabilize on its own. So can you just broaden this thought? Do you think that RBI is using its reserves for stabilizing the rupee?
I think RBI has handled this very well. They have let the rupee adjust, which it should do because we have a change in the international environment. What's happening in the Strait of Hormuz has consequences. Therefore, you should expect the currency to depreciate so that you get the adjustment that you need for the economy. RBI has been doing some amount of intervention, you know, to address disorderly market conditions, and that is perfectly fine to do. I think what you should avoid against is doing an intervention that keeps the currency from simply not moving at all, and that I think would be counterproductive because it will also make foreign investors hold off and not bring money into the country because they think the rupee is going to weaken again in the future once the intervention stops. So I think that the way it's being handled right now is appropriate.
Global interest rates are already very elevated and we are sticking to RBI again. RBI is to announce their bi-monthly policy tomorrow, when the new rates are to be announced. So do you see that RBI will increase their rates tomorrow?
RBI is obviously trading off at this point the consequences for inflation that come with the higher oil prices and with the currency depreciation, but against what's happening in terms of economic activity. I mean I expect that in the near term the RBI will likely be on hold, but then eventually maybe in the future depending upon developments and what's happening with inflation they can respond. But again, going on a data-dependent approach is a useful thing to do. And on one hand, while there is some inflationary pressure, at least we're not seeing that much in consumer price inflation also because there's not been that much pass-through of the higher oil prices into fuel prices at the pump. There's been some increase but not that much. On the other hand, you also do have the somewhat softening of economic activity, and so therefore maybe waiting for more data to see what's happening to inflation, what's happening to economic activity before raising rates is probably one approach to take.
The West Asia problem is affecting the Indian population on multiple levels — not only the energy crisis but on other fronts also. So what can the government do more to ease out the pain of the people due to the West Asia problems? Should we go for the reforms only or can some cash transfers also help? And essentially, what can the government pull out from its box to ease out the tensions which are among the population at the financial front?
I mean, the government is already to some extent supporting the economy because it has not let prices at the fuel pump go up by as much as one would expect it to given how much world oil prices have risen. You know, in fact the pass-through has been much lesser than what it is for many other countries. So that itself is like an implicit subsidy to households and companies. You know, what probably will be called for is to let more of the price increase pass through, but then have much more targeted support to vulnerable households and companies as opposed to broad-based support in terms of keeping fuel prices, you know, artificially low. So I think that at this current moment providing more targeted support is a good way to go. More generally, I think what would be helpful is doing further reforms in terms of improving the ease of doing business, having a positive story on AI in terms of the fact that AI can be net positive for India.
of the fact that AI can be net positive for India. These are the kinds of actions that would help increase interest in India as a destination for investment capital, and that would also take the pressure off the rupee.
On the supply side, it is worldwide very affected and it's in very bad shape. The supply chain globally is very affected. How can India, a country like India, stay resilient in supply chains and different things?
Well, I think one of the areas of supply where India can do more is on the energy front, shifting away from reliance on fossil fuel imports towards more reliance on renewable energies, but also nuclear. That can help reduce the import bill and reduce the dependence on foreign supply chains. The broader reorientation of trade that we are seeing, also driven by geopolitics, can also be towards India's benefit because there are more countries that would look at diversifying their sources from which they buy, and India can be one place which could be providing inputs into the supply chain. It's good news that India is signing up more trade agreements, including with the European Union, that will help also make India play a bigger role in global supply chains than it is doing right now.
There is so much instability around the globe, and still we are seeing the capital markets of the US and some East Asian countries at their all-time highs at this time. So do you think that they're not actually accurately thinking about the risk of the West Asia crisis?
No. What's happening in the US and in Korea and in Taiwan is the AI story, right? So while on the one hand you do have the problem coming out of West Asia, there's a huge AI boom right now happening in the US and in the countries that we just talked about that is driving up stock market valuations. There is certainly a risk that there is some exuberance, they are overdoing it, but given the expectations in terms of how transformative AI is going to be, there is huge enthusiasm for putting money in that particular sector, and that's the reason why despite everything else that's happening in the world, there are these very high stock valuations.
And as you talked about AI, do you think that AI has started putting its imprint on the global GDP? Is AI the GDP in the global economy?
AI is absolutely driving an important part of growth in, say, the US. If you look at the most recent quarter for growth in the US, I think about half of it is coming from AI, and it's coming because of AI investment, the building up of data centers, investment in chips, data processors and so on. You've seen a large amount of investment, and that is an important driver of growth in the US. And since the US is a big part of the world economy, that has spillovers to the rest of the world. So absolutely, AI is an important driver for growth.
In a recent development, US Trade Act 301 has been made effective on India and some other countries. So how do you see the impact of Section 301 being imposed against India and other countries, and how is it going to affect the exports of India to the US?
This news just came out today in terms of the imposition of 301. There are still details that have to be determined about what it will take for India to come off the 301 list as opposed to being slapped with additional tariffs. I mean, these tariffs are not just consequential for India, but they're consequential for the US. We have seen inflation be higher because of the tariffs that have been put on all imports coming into the US. So this is a problem even for the US. It is reducing trade between the countries that you have these high tariffs on. It is obviously a negative for countries that get slapped with a higher amount of tariffs. But I think what we've learned from 2025 is that when it comes to US trade policy, there's nothing very predictable about it, and it appears to be fluctuating over time. So again, I think we need to wait to see what the actual details are in terms of what this 301 ruling means. What precisely will be the tariff rate on India?
We all are expecting that things stabilize as fast as they can, but we are seeing escalations also in some parts of West Asia, like Israel still continuing with Lebanon, and last night we saw Iran attack some of the US allies. So it's not going to end very soon. So is it going to go very long, according to you? And how do you see the impact of a long-term war on all countries, not only the US, India or some major countries, but all other countries?
I think there's still a very high level of uncertainty about how this war will play out. I do worry that markets are not pricing in sufficiently this risk of a prolonged war in West Asia. If this continues for another month, we're looking at oil prices that could go up to like $120 and $140 a barrel and could stay there for much longer. In that scenario, we could have global growth, which is now projected at 3.1%, going down to say 2.5% and even closer to 2%. I think that risk very much exists, even if it's not being priced in markets right now, because there is still the optimism that there will be a deal and that this situation will resolve relatively quickly. Different parts of the world are being affected differently by it, and like I said, the AI story is offsetting the negativity that's coming from these developments in West Asia for some countries in the world.
Thank you. What further implications will it have on India's macro numbers, and are there any specific indicators that are getting close to the danger zone, according to you?
I mean, as of now, there is still very much the expectation that this conflict will end quickly, and there are negotiations happening right now between Iran and the US. If you look at the pricing in markets, there is the sense that the strait will open. Now, we are not going to see the price of oil come down all the way very quickly. It's going to take probably till the middle of next year for oil to come back to say $70 or $75 a barrel. So there is going to be an effect lasting into next year. In terms of the impact on India, there is an expectation that growth, which is currently projected by the IMF at around 6.5%, will likely come down some more and come closer towards the 6% number because of these developments. But we still are not seeing very big risks play out. We're not seeing oil reaching $120, even $140 a barrel. So that's the good news. And if that were to happen, I think the consequences for the global economy would be much more severe.
In a recent book written by you, you have just underlined that the rupee should find its own level and it should stabilize on its own. So can you just broaden this thought? Do you think that the RBI is using its reserves for stabilizing the rupee?
I think the RBI has handled this very well. They have let the rupee adjust, which it should do, because we have a change in the international environment. What's happening in the Strait of Hormuz has consequences, therefore you should expect the currency to depreciate so that you get the adjustment that you need for the economy. The RBI has been doing some amount of intervention to address disorderly market conditions, and that is perfectly fine to do. I think what you should avoid is doing an intervention that keeps the currency from simply moving at all, and that I think would be counterproductive because it will also make foreign investors hold off and not bring money into the country because they think the rupee is going to weaken again in the future once the intervention stops. So I think the way it's being handled right now is appropriate.
Global interest rates are already very elevated, and we are sticking with RBI again. The RBI is to announce its bimonthly policy tomorrow, when the new rates are to be announced. So do you see that the RBI will increase their rates tomorrow?
The RBI is obviously trading off at this point the consequences for inflation that come with the higher oil prices and with the currency depreciation, against what's happening in terms of economic activity. I expect that in the near term the RBI will likely be on hold, but then eventually, maybe in the future, depending upon developments and what's happening with inflation, they can respond. But again, going on a data-dependent approach is a useful thing to do. On one hand, while there is some inflationary pressure, at least we're not seeing that much in consumer price inflation, also because there's not been that much pass-through of the higher oil prices into fuel prices at the pump. There's been some increase, but not that much. On the other hand, you also do have the somewhat softening of economic activity, and so therefore maybe waiting for more data to see what's happening to inflation, what's happening to economic activity, before raising rates is probably one approach to take.
The West Asia problem is affecting the Indian population on multiple levels, not only the energy crisis but on other fronts also. So what can governments do more to ease out the pain of the people due to the West Asia problems? Should we go for reforms only, or can some cash transfers also help? And essentially, what can the government pull out from its box to ease out the tensions among the population on the financial front?
I mean, the government is already to some extent supporting the economy because it has not let prices at the fuel pump go up by as much as one would expect given how much world oil prices have risen. In fact, the pass-through has been much lesser than what it is for many other countries. So that itself is like an implicit subsidy to households and companies. What probably will be called for is to let more of the price increase pass through, but then have much more targeted support to vulnerable households and companies as opposed to broad-based support in terms of keeping fuel prices artificially low. So at this current moment, providing more targeted support is a good way to go. More generally, I think what would be helpful is doing further reforms in terms of improving the ease of doing business, having a positive story on AI, in terms of the fact that AI can be net positive for India. These are the kinds of actions that would help increase interest in India as a destination for investment in capital flows, and that would also take the pressure off the rupee.
From the supply side, it is worldwide very affected and it's in very bad shape. The supply chain globally is very affected. How can India, a country like India, stay resilient in supply chains and different things?
Well, I think one of the areas of supply where India can do more is on the energy front, shifting away from reliance on fossil fuel imports towards more reliance on renewable energies, but also nuclear. That can help reduce the import bill and reduce the dependence on foreign supply chains. The broader reorientation of trade that we're seeing, also driven by geopolitics, can also be towards India's benefit because there are more countries that would look at diversifying their sources from which they buy, and India can be one place which could be providing inputs into the supply chain. It's good news that India is signing up more trade agreements, including with the European Union, that will help also make India play a bigger role in global supply chains than it is doing right now.
There is so much instability around the globe, and still we are seeing the capital markets of the US and some East Asian countries at their all-time highs at this time. So do you think that they're not actually accurately thinking about the risk of the West Asia crisis?
No. What's happening in the US and in Korea and in Taiwan is the AI story, right? So while on the one hand you do have the problem coming out of West Asia, there's a huge AI boom right now happening in the US and in the countries that we just talked about that is driving up stock market valuations. There is certainly a risk that there is some exuberance, they are overdoing it, but given the expectations in terms of how transformative AI is going to be, there is huge enthusiasm for putting money in that particular sector, and that's the reason why despite everything else that's happening in the world, there are these very high stock valuations.
As you talked about AI, do you think that AI has started putting its imprint on the global GDP? Is AI the GDP in the global economy?
AI is absolutely driving an important part of growth in, say, the US. If you look at the most recent quarter for growth in the US, I think about half of it is coming from AI, and it's coming because of AI investment, the building up of data centers, investment in chips, data processors and so on. You've seen a large amount of investment, and that is an important driver of growth in the US. And since the US is a big part of the world economy, that has spillovers to the rest of the world. So absolutely, AI is an important driver for growth.
In a recent development, US Trade Act 301 has been made effective on India and some other countries. So how do you see the impact of Section 301 being imposed against India and other countries, and how is it going to affect the exports of India to the US?
This news just came out today in terms of the imposition of 301. There are still the details that have to be determined about what it will take for India to come off the 301 list as opposed to being slapped with additional tariffs. I mean, these tariffs are not just consequential for India, but they're consequential for the US. We have seen inflation be higher because of the tariffs that have been put on oil imports coming into the US. So this is a problem even for the US. It is reducing trade between the countries that you have these high tariffs on. It is obviously a negative for countries that get slapped with a higher amount of tariffs. But I think what we've learned from 2025 is that when it comes to US trade policy, there's nothing very predictable about it, and it appears to be fluctuating over time. So again, I think we need to wait to see what the actual details are in terms of what this 301 ruling means. What precisely will be the tariff rate on India?
We all are expecting that things stabilize as fast as they can, but we are seeing escalations also in some parts of West Asia, like Israel still continuing with Lebanon, and last night we saw Iran attack some of the US allies. So it's not going to end very soon. So is it going to go very long, according to you? And how do you see the impact of a long-term war on all countries, not only the US, India or some major countries, but all other countries?
I think there's still a very high level of uncertainty about how this war will play out. I do worry that markets are not pricing in sufficiently this risk of a prolonged war in West Asia. If this continues for another month, we're looking at oil prices that could go up to like $120 and $140 a barrel and could stay there for much longer. In that scenario, we could have global growth, which is now projected at 3.1%, going down to say two and a half percent and even closer to 2%. I think that risk very much exists, even if it's not being priced in markets right now, because there is still the optimism that there will be a deal and that this situation will resolve relatively quickly. Different parts of the world are being affected differently by it, and like I said, the AI story is offsetting the negativity that's coming from these developments in West Asia for some countries in the world.
Thank you. What further implications will it have on India's macro numbers, and are there any specific indicators that are getting close to the danger zone, according to you?
I mean, as of now, there is still very much the expectation that this conflict will end quickly, and there are negotiations happening right now between Iran and the US. If you look at the pricing in markets, there is the sense that the strait will open. Now, we are not going to see the price of oil come down all the way very quickly. It's going to take probably till the middle of next year for oil to come back to say $70 or $75 a barrel. So there is going to be an effect lasting into next year. In terms of the impact on India, there is an expectation that growth, which is currently projected by the IMF at around 6.5%, will likely come down some more and come closer towards the 6% number because of these developments. But we still are not seeing very big risks play out. We're not seeing oil reaching $120, even $140 a barrel. So that's the good news. And if that were to happen, I think the consequences for the global economy would be much more severe.
In a recent book written by you, you have just underlined that the rupee should find its own level and it should stabilize on its own. So can you just broaden this thought? Do you think that the RBI is using its reserves for stabilizing the rupee?
I think the RBI has handled this very well. They have let the rupee adjust, which it should do, because we have a change in the international environment. What's happening in the Strait of Hormuz has consequences, therefore you should expect the currency to depreciate so that you get the adjustment that you need for the economy. The RBI has been doing some amount of intervention to address disorderly market conditions, and that is perfectly fine to do. I think what you should avoid is doing an intervention that keeps the currency from simply moving at all, and that I think would be counterproductive because it will also make foreign investors hold off and not bring money into the country because they think the rupee is going to weaken again in the future once the intervention stops. So I think the way it's being handled right now is appropriate.
Global interest rates are already very elevated, and we are sticking with RBI again. The RBI is to announce its bimonthly policy tomorrow, when the new rates are to be announced. So do you see that the RBI will increase their rates tomorrow?
The RBI is obviously trading off at this point the consequences for inflation that come with the higher oil prices and with the currency depreciation, against what's happening in terms of economic activity. I expect that in the near term the RBI will likely be on hold, but then eventually, maybe in the future, depending upon developments and what's happening with inflation, they can respond. But again, going on a data-dependent approach is a useful thing to do. On the one hand, while there is some inflationary pressure, at least we're not seeing that much in consumer price inflation, also because there's not been that much pass-through of the higher oil prices into fuel prices at the pump. There's been some increase, but not that much. On the other hand, you also do have the somewhat softening of economic activity, and so therefore maybe waiting for more data to see what's happening to inflation, what's happening to economic activity, before raising rates is probably one approach to take.
The West Asia problem is affecting the Indian population on multiple levels, not only the crisis but on other fronts also. So what can the government do more to ease out the pain of the people due to the West Asia problems? Should we go for reforms only, or can some cash transfers also help? And essentially, what can the government pull out from its box to ease out the tensions among the population on the financial front?
I mean, the government is already to some extent supporting the economy because it has not let prices at the fuel pump go up by as much as one would expect given how much world oil prices have risen. In fact, the pass-through has been much lesser than what it is for many other countries. So that itself is like an implicit subsidy to households and companies. What probably will be called for is to let more of the price increase pass through, but then have much more targeted support to vulnerable households and companies as opposed to broad-based support in terms of keeping fuel prices artificially low. So at this current moment, providing more targeted support is a good way to go. More generally, I think what would be helpful is doing further reforms in terms of improving the ease of doing business, having a positive story on AI, in terms of the fact that AI can be net positive for India. These are the kinds of actions that would help increase interest in India as a destination for investment in capital flows, and that would also take the pressure off the rupee.
On the supply side, it is worldwide very affected and it's in very bad shape. The supply chain globally is very affected. How can India, a country like India, stay resilient in supply chains and different things?
Well, I think one of the areas of supply where India can do more is on the energy front, shifting away from reliance on fossil fuel imports towards more reliance on renewable energies, but also nuclear. That can help reduce the import bill and reduce the dependence on foreign supply chains. The broader reorientation of trade that we are seeing, also driven by geopolitics, can also be towards India's benefit because there are more countries that would look at diversifying their sources from which they buy, and India can be one place which could be providing inputs into the supply chain. It's good news that India is signing up more trade agreements, including with the European Union, that will help also make India play a bigger role in global supply chains than it is doing right now.
There is so much instability around the globe, and still we are seeing the capital markets of the US and some East Asian countries at their all-time highs at this time. So do you think that they're not actually accurately thinking about the risk of the West Asia crisis?
No, what's happening in the US and in Korea...
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