Former Reserve Bank of India (RBI) governor Raghuram Rajan spoke to CNBC on global economic recovery amid the escalating Russia-Ukraine crisis. He also shared his views on the Fed's policy stance, emphasizing the need to balance out the risk of overtightening rates.

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In terms of the US Federal Reserve’s policy stance, Rajan believes that if inflation in the US was low, the Fed would have a clear sense of what to do and that would be.

"With inflation where it is, that becomes harder and I think the Fed will have to perhaps balance out the risks of overtightening. So my sense is what this does is it takes some of the more outlandish moves off the table. Fed will start the process of tightening in its March meeting but maybe it will signal a steady pace rather than an abrupt pace,” he said.

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Rajan believes recoveries at risk come from the price of energy - natural gas in Europe and more generally oil across the world. The concern is more about natural gas, which is in much more limited supply and harder to get to the right places.

According to him, there is scope for a ramp-up in oil production by the Organization of the Petroleum Exporting Countries (OPEC).

"... But also perhaps if Iran comes back into the fold, oil can be more subdued over time and Shale can ramp up. Right now production is about 2 million barrels a day below its peak and that can also be ramped up," Rajan said.

Also Read: Russia-Ukraine crisis: Govt holds discussions on crude oil prices; excise levels being reassessed

He believes grain prices can also go up because Ukraine and Russia contribute a fair amount to world grain.

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(Edited by : Abhishek Jha)

First Published:Feb 24, 2022 6:19 PM IST