Poonam Gupta has been writing extensively on complex issues such as inflation targeting framework, monetary policy transmission and how India should prepare for both ex ante and ex post for future shocks such as the Trump tantrum. The prolific writer has finally got an opportunity to walk the talk.
People who have worked closely with Gupta, the newly-appointed deputy governor of the Reserve Bank of India, say her intellectual width and vast experience in dealing with monetary, fiscal and trade issues will come in handy as she strives to find a fine balance between fiscal-monetary coordination during these uncertain times.
There is no doubt that her track record is impeccable. Gupta has two decades of experience in the International Monetary Fund and the World Bank and has been heading the National Council of Applied Economic Research (NCAER) since 2021. She is also a member of the Economic Advisory Council to the Prime Minister and convener of the Advisory Council to the 16th Finance Commission.
As the first woman to head NCAER, she also has the experience of managing an institution, which would be helpful in dealing with the administrative component of her new job. Besides monetary policy, Gupta is likely to get charge of various key departments, including financial markets operations, financial markets regulation, as well as economic and policy research at the RBI.
At NCAER, Gupta leads the work on issues related to economic growth, international financial architecture, central banking, macroeconomic stability, public debt, and state finances. She holds a PhD and master’s degree in Economics from University of Maryland, US, and a master’s degree in Economics from Delhi School of Economics, University of Delhi. She won the 1998 EXIM Bank award for her PhD on international economics.
In between, Gupta has taught at the Delhi School of Economics, University of Maryland, and as a visiting faculty at ISI, Delhi. She has also been the RBI Chair professor at NIPFP and a professor at ICRIER.
She is currently on the boards of NIPFP and Global Development Network, a member of the World Bank’s advisory groups for ‘Poverty & Equity’ and the ‘World Development Report’, a member of the Development Advisory Committee of NITI Aayog, and of Ficci’s executive committee. She was the Chair of the Task Force on Macroeconomics and Trade during India’s G20 Presidency.
In an article in February, Gupta, a prolific writer, argued that the inflation targeting framework of 4% with a band of plus or minus 2 percentage points in its ninth year needs a fresh look. “It would be prudent to conduct an independent review to address the following questions: Is an inflation target of 4% still appropriate? Should India narrow down its inflation tolerance band of 2-6%? Should it move from targeting an inflation level within a band, to just targeting a narrower band of say 4-6%, with no explicit point target?” she wrote.
Gupta has previously emphasised the importance of updating the weight of food prices in the inflation index and enhancing monetary policy transmission, views that could influence her approach at the RBI.
In another opinion piece recently, Gupta put her thoughts on tackling the impact of Trump tantrums. “For ex ante measures, India should encourage stable, longer-term capital inflows (such as FDI) over volatile short-term flows (like FII flows). It should rebuild its reserves buffer as soon as the conditions turn conducive. While avoiding excessive appreciation or volatility of the exchange rate, it should still let it move more than has been the case in the recent past,” she wrote.
To soften the impact ex post, a fine calibration of exchange rate depreciation and use of reserves is needed, she noted. In recent years, policy response has shifted more towards the use of reserves while limiting the depreciation of the exchange rate. This ought to be revisited for speedier mitigation of the shocks, she added.
Coming down heavily on poor fiscal management by some states, she recently wrote that there may be room for a fiscal “grand bargain”, where heavily indebted states receive some debt relief (a portion of their debt is transferred to the balance sheet of the Central government) in return for them conceding additional Central government oversight, amending their practices, and even some dilution of fiscal autonomy. Such bargains have worked in other fiscal federations.
With her appointment, the monetary policy committee (MPC) gets a woman member after a gap. Unlike the current MPC, each of the previous two committees had one woman member.