NEW DELHI: The minutes of the June 4 Monetary Policy Committee (MPC) of the Reserve Bank of India meeting, released on Friday, showed the six-member committee largely acknowledged the predominantly supply-side nature of the current bout of inflation, and consequently saw no need for monetary policy action at this point in time.
However, a few members have cautioned against rising global fuel prices and elevated inflation expectations. "The only source of comfort is that all the evidence at the moment suggests that inflation is being driven not by domestic demand, but by supply side factors including the global surge in commodity prices. This could change as the recovery gathers steam," wrote MPC member Jayanth R Varma.
Similarly, Mridul K Saggar cautioned that a further rise in inflation expectations may warrant some policy response. These comments gain salience in the context of higher retail prices of petrol and diesel fuel prices in the past two weeks to record highs in several states.
RBI deputy governor Michael Debabrata Patra also flagged elevated global commodity prices as an upside risk to the inflation trajectory, and suggested tax cuts to mitigate the pass-through to retail prices. However, there was clear agreement that reviving growth continues to be the top priority of the RBI.
"The emphasis should be to continue with accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy," said RBI Governor Shaktikanta Das, stressing that the forward guidance of the MPC, which included a commitment to revive and sustain growth - demonstrate the unambiguous commitment of the MPC to support a growth revival.