MUMBAI: The minutes of Monetary Policy Committee meeting when it decided a second straight repo rate cut of 0.25 per cent shows that most members who voted for the cut are talking the language of growth, and even the dissenters, while sticking to their guns in terms of being watchful of inflation, flag growth risks. MPC minutes read along with the recent inflation and industrial production data can be a pointer to a probable rate cut when it meets again in June.
Governor Shaktikanta Das who has steered the change in outlook strongly in favour of supporting growth has also touched upon the idea of looking at policy rate reduction beyond the conventional way of 25 bps or multiples thereof. This could also mean keeping the cuts below 25 bps and an intent on the need for lower rates.
Ravindra Dholakia, the consistently dovish member of MPC, had said that he voted for change in stance from ‘neutral’ to ‘accommodative’ with a 25 bps cut, though he would have preferred a ‘35-40 bps-accommodative’, so as to rule out any hikes for the time being. “This is the right time to act decisively. When the pitch is favourable and no possibility of bouncers or googlies coming in, a well-set batsman has to score and not miss the opportunity to build the total,” Dholakia said.
With inflation outlook looking benign and headline inflation expected to remain below target in the current year, Das said it becomes necessary to address the challenges to sustained growth. Deputy governor Acharya said that “not withstanding signs of weakness in growth evinced in high frequency economic indicators, I am inclined to wait for some more time for incoming data to resolve several important uncertainties that will shape the Indian economy in the coming one or two years”.
