Ex-IMF Chief Economist Gita Gopinath Speaks On Iran War's Impact On Economy | Rajdeep Sardesai

Added: 2026-05-05

[00:00:00]So, in conclusion, in your assessment, how significant is the risk to the twin pressures that everyone is talking about post this West Asia war for India, higher oil import bills and exchange rate volatility? These are the two twin Are these the twin pressures that actually need to be looked at and monitored very carefully? The pressure on India's current account and on the rupee is meaningful. Like I said, this is an actual fundamental shock of a supply shock. Even if the war ends tomorrow, we're not seeing oil prices going back to the pre-war level. It's going to be higher. There is going to be some pass-through into inflation. That's certainly the case. Ensuring that India is able to continue to maintain the good macro stability that it has gotten to, which is being able to keep inflation within the band, while at the same time also ensuring that fiscal deficits, which are doing well at the central government level but not at the state levels, certainly needs more action on that front. And the more broad-based reforms, including judicial reforms, including in terms of continuing the infrastructure build-up, land reforms, all of that is what it will take. So, Professor Gopinath, if you were advising the Modi government, one, two, three, what are the three things you would tell them that they need to do for 26 FY26-27 that would give a sense that India is on the right track?

[00:01:25]I would say >> Given given this extreme volatility that we are seeing around us, how do you How do you in a way mitigate the current account deficit without sacrificing, compromising on growth targets?

[00:01:41]I would first certainly just recognize the fact that this is a negative shock for the Indian economy.

[00:01:47]There's no getting around the fact that when you are a large importer of fuel and prices have gone up as much as they have, there will be a deterioration in the current account. That requires accepting that there will be pressure on the rupee to depreciate. I don't see an argument to go and use up very expensive foreign exchange reserves to go and defend the currency. This is a shock that has to be, in a sense, borne.

[00:02:10]On the fiscal front, at some point, they will have to let prices at the pump go up by some amount because otherwise the effect on the on the fiscal deficit is going to be very is going to become very consequential. But I think what India has done well, like I said, is in the macro stability in terms of macro stability, which is keeping inflation within the inflation band.

[00:02:30]Fiscal at the central level has been well managed, not so much at the at the state level. So, somehow incentivizing the states to be able to keep their deficits small, super important. And continuing to engage with the world, and I think India is doing that nicely on the trade front, too, which is having deals with the European Union, you know, with South Korea recently, but more generally working with other countries, creating more trade agreements with them. Building economic relations with them will all be very positive.

[00:02:59]>> So, in a way, what you are saying is build your bilateral trade deals. Don't just rely on multilateral trade trade arrangements anymore. Don't rely on the United States anymore, presumably.

[00:03:11]A piece of advice for Donald Trump that you would give since he's at the center of it all. What I mean, this weaponizing of uncertainty surely is the last thing the world needs. Yeah. So, firstly, I do think India and the US should absolutely work together. They are both important large economies, and it's good for both of them and for the world that they remain engaged. In the case of Trump, I mean, he's somebody who likes to have low interest rates because, as you know, he he keeps pushing for that. He's going to get that if he's able to prevent inflation from going up. That is now a concern in the US. And so, the more he can do to keep because he wants to keep prices low, and he wants prosperity and abundance in the US economy. I think less less of this high levels of volatility and uncertainty would be would be very valuable. You know, Professor Gopinath, the last time you were interviewed by India today, you went viral because of your comments on environment and the climate in particular, pollution, which you had said was integral to ensuring the ease of doing business. You needed to ensure clean air. You still stick by that. That Are you Is Is the air that you are breathing in Mumbai a bit better than what you breathe in Delhi? And you believe that's again I mean, these are going to be the future challenges, presumably, not just to India but other countries in the region as well. Oh, no, absolutely I believe that addressing pollution in India will give you a great bang for the buck. The economic consequences are meaningful. Obviously, depending upon the time of the year, it's worse. Winters in Delhi, when I was there, it was really, really bad. I mean, it's just That's again an a solvable problem, and the government should certainly address it.

[00:04:58]I'm going to leave it there. You've been more diplomatic this time when you have spoken about the climate crisis. At that time, you were seen as someone who was making it very clear, if you don't get that right, then you're not going to attract the kind of investments that India really needs at the moment. But I appreciate you joining us again at a time, as I said, of great global uncertainty. Three months ago, it was Greenland. Now, it's even more worrying with what's been happening in Iran. Thank you very much, Professor Gopinath, for joining me on the show today.

[00:05:28]>> Thank you, Rajdeep.