Poonam Gupta Takes Charge as RBI Deputy Governor: Insights On Inflation, Trade Wars And Rupee Strategy

Poonam Gupta assumed charge as the Reserve Bank of India’s new deputy governor on Friday and will join the monetary policy committee during an ongoing rate-cutting cycle.

Gupta’s previous work highlights her focus on improving the design and implementation of India’s inflation targeting framework. In a joint paper with Barry Eichengreen, she wrote that the effective weight of food in India’s consumer price index should fall over time with rising incomes, suggesting a shift from the current basket could ease some concerns over the inflation targeting regime. The authors estimate the correct food weight at current per capita income to be around 40%, with a likely decline to 30% over the next decade.

The paper concludes that since the adoption of inflation targeting, the RBI has not become more hawkish or reactive, but outcomes have improved—showing lower and more stable inflation, better-anchored inflation expectations, and stronger monetary transmission. The authors warn against making major changes to the framework, such as broadening the mandate, targeting core over headline inflation, or altering the tolerance band. Instead, they recommend updating the CPI food weight.

The Ministry of Statistics plans to roll out a new CPI series in February next year based on recent household consumption data, which is expected to lower the weight of food in the inflation basket.

Gupta and Eichengreen also note that food-price inflation, often captured in headline inflation, feeds through to core inflation. They argue it should not be disregarded, even though the RBI need not respond to every movement in food prices. Ignoring prolonged divergence in food inflation from the target could have negative consequences, they write.

On exchange rate policy, Gupta in March wrote that India should allow more flexibility in the rupee’s movement while avoiding sharp appreciation or volatility. In a column for The Economic Times dated 10 March, she said the RBI should rebuild foreign exchange reserves when conditions allow and consider a calibrated depreciation strategy combined with reserve use during external shocks.

She added that the RBI had recently focused more on using reserves to manage currency movements, while limiting depreciation. This approach should be re-evaluated for more effective mitigation of external shocks, she suggested. Gupta emphasised the importance of encouraging long-term capital inflows like FDI over volatile short-term flows and warned against introducing capital controls. She also suggested revisiting bilateral swap lines, especially with Japan, and schemes to attract diaspora funding.

In the context of global trade tensions, Gupta has argued that a weaker currency can benefit India by cushioning export competitiveness.

Gupta has also written on public finances. In another paper with Eichengreen, she analysed India’s federal debt and called for reforms to enhance fiscal discipline at the state level. The paper notes that a third of India’s public debt comes from states, with wide variation in debt levels—ranging from under 20% of state GDP in Odisha, Maharashtra and Gujarat to nearly 50% in Punjab.

Over the past decade, half of India’s larger states have added over 10 percentage points to their debt-to-GDP ratios. Others have shown either fiscal prudence or moderate debt increases. The authors project that under a business-as-usual approach, most states will accumulate more debt and the divergence between highly indebted and less indebted states will grow further, potentially limiting expenditure flexibility for more indebted states.

Gupta was previously Director General at the National Council of Applied Economic Research. She brings extensive research experience in inflation targeting, monetary policy, exchange rate management, and federal fiscal issues to her new role at the RBI.