Varma, who is also a member of the Monetary Policy Committee (MPC) of the Reserve Bank, in an interview to PTI said that inflation is a matter of concern, but as of now it is the persistence of inflation rather than its level that is a matter of concern.

According to Varma, the pre-pandemic level of economic activity has already been surpassed, and the rest of this financial year should also see further recovery.

He noted that calendar year 2021 saw dozens of new economy companies receive large funding both in private and public equity markets and these companies would have positive spillover effects into the rest of the economy as well.

“I am hopeful that in a few quarters from now, capital investment would also begin to pick up even in the old economy,” the eminent economist said.

India is contemplating bringing a bill in Parliament to deal with the challenges posed by the unregulated cryptocurrencies. Currently, there are no particular regulations or any ban on use of cryptocurrencies in the country.

Asked about the impact of ‘taper tantrum’ or withdrawal of monetary stimulus by the US Federal Reserve on India, he said the Indian economy is a lot more resilient on the external front than it was in 2013.

Varma opined that in any case, using the interest rate to achieve an exchange rate objective would be inconsistent with the inflation targeting framework that is in place today.

The taper tantrum had started in mid-2013 when the Fed hinted at reversing its easy monetary policy.