NEW DELHI: Chief Economic Advisor (CEA) Arvind Subramanian made a strong case for interest rate cuts a week before Reserve Bank of India Governor Raghuram Rajan reviews monetary policy . Subramanian also said that India should not allow the rupee to become uncompetitive when nations such as China are resorting to aggressive monetary easing to make their currencies weaker.Consumption and public investment are driving growth while private investment and exports are not doing as well as expected, Subramanian said in his interim update on the economy as the Narendra Modi government completed a year in office, adding that the economy was showing signs of recovery. The government’s Make in India export-oriented manufacturing push can succeed only if rupee is at an appropriate level."They (other countries) are aggressively easing monetary policy,"the CEA said. "It will make their currency weaker and their exports competitive."Subramanian’s concerns were expressed amid the 36-currency, trade-weighted, real effective exchange rate (REER) appreciating to 111.7 in April from 104.62 in the year-ago month.He hinted that the RBI could follow China’s lead on this. "If you were to ask me how did China accumulate $4 trillion of reserves, it’s essentially buying it to keep the currency very, very competitive. So, it is a lesson for all of us. It is not what everything China does we should we imitate… but that is the lesson we should learn from,"he said."China is now cutting the interest rate quite aggressively in response to its growth slowing down and that is going to make its currency more competitive. We need to respond accordingly."Subramanian said inflation was lower than RBI’s target and government fiscal consolidation, both in terms of quantity and quality, was on track. He said there was a case for cheaper financing to boost consumption."CPI (consumer price index) inflation is down at about 5%, the latest reading, and WPI (wholesale price index) inflation is in negative territory... the latest reading was of course (-)2.7%,"he said. Retail inflation was likely to remain at 5-5.5%, as projected by the Economic Survey, he said.That made the environment conducive for the loosening of monetary policy, he suggested. "Just look at the analysis in terms of what is the inflation forecast, what is the fiscal consolidation, what is the international environment and then you think about how the monetary policy should respond. I am not going to get into should it be x or y or any amount. The point is, I think, that there is scope for monetary easing,"he said."There is no point in being really too explicit because there are people who are constitutionally vested with tasks about actually looking into exactly at that.”Minister of State for Finance Jayant Sinha said separately in Chandigarh that it was time to lower rates. "We have achieved macroeconomic stability, inflation has come down. This now creates room for the Reserve Bank of India to cut rates. I am hopeful that on June 2, Dr (Raghuram) Rajan will cut rates,"Sinha said while addressing industry representatives.The central bank is scheduled to review monetary policy next week. Pressure is rising for rate cut on account of slowing inflation and the need to perk up growth.Summing up the macroeconomic scenario after one year of the Modi government, Subramanian said the "bottom is behind us"and that there was evidence of a pickup in growth. "Stalled projects numbers are declining… Real credit growth shows uptick,"he said, adding that indirect taxes showed a positive trend in April but it may be too early to say whether this will persist.He sees growth picking up thanks to various government moves."In the short run, the economy needs policy support to boost con- sumption through cheaper financing, through public investment, implementation of what we have in the budget and measures to boost private investment and kickstart all these stalled projects,"Subramanian said."If these things happen over the next few months, I think you can reasonably expect economic activity and growth to pick up even more."Asked about moving towards full capital account convertibility, he said this needed to be done in a "calibrated fashion… I do not think we are there yet.”On the risk posed by a rain-deficient monsoon , he said the government expects inflation to remain under control as it had adequate buffer stocks to manage the supply side situation as in the previous financial year."Because we do have adequate stocks, we will be able to contain inflation even if monsoon does not turn out to be as good,"he said. The India Meteorological Department has projected a below-normal monsoon, which might impact food production, leading to a price rise.