Asked about the major challenges before economy and policy makers, Joshi said there are two major things that can topple the momentum, one is inflation and the second is currency.
"If inflation moves above 10 per cent for the next two or three months, and remain there, that could have a negative impact on lot many other sectors. Retail is one, SMEs, manufacturing, these would face pressure if interest rate is going to go up. This is on backdrop of RBI's focus on inflation control.
"So, I guess inflation is the biggest worry. Second would be currency. When rupee was at 54-55 level, since then prices of many items have gone up substantially. One of the factors that seeds inflation, is currency," he added.
Talking about recent plunge in rupee that saw it hitting record low levels very close to Rs 70 against dollar, Joshi said, "A lot of depreciation that we saw recently was
sentiment driven, rather than being the actual market action.
"That sentiment needs to reverse and the moment we see that GDP has bottomed at 4.9 per cent and inflation has been contained, the sentiment will change for better and that would reflect in currency as well.
Joshi also said that on macroeconomic level, India's numbers look much better than what they were a few month ago or even a couple of years back.
"There are certain underlying fundamentals of our economy which are not getting reflected in rupee valuation. Currency also reflects the efficiencies you build in your system. If we have a static or a low-range moving rupee, then the ability of manufacturers and service providers to create demand would be better and the ability to contain costs would be enhanced.
"That is where China has succeeded and they maintained a static exchange rate for a very long time and they ensured that efficiency is built into their system. Competition is growing and other currencies are also depreciating. In that situation, if we look at a stable or appreciating rupee then we can look at efficiencies," he said.