MUMBAI: Monetary policy has to remain extra alert to be ready to act as and when warranted to preserve the hard-earned macroeconomic stability, Reserve Bank of India Governor Shaktikanta Das has said.
The fundamental goal of the monetary policy is to align inflation with the 4 per cent target and anchor inflation expectations, Das said, according to the minutes of the six-member Monetary Policy Committee (MPC) released by the RBI on Friday.
The MPC in its last meeting earlier in the month, decided to keep the benchmark lending rate at 6.5 per cent, for the fourth time in a row, in a bid to keep retail inflation under check.
"Monetary policy has to remain extra alert and ready to act if the situation warrants. The hard-earned macroeconomic stability has to be preserved," Das said while voting to keep the benchmark lending rate unchanged at 6.5 per cent, along with five other members of the MPC.
Das had cautioned that recurring incidences of large and overlapping supply side shocks bring with them the risks of generalisation of inflation impulses, possible loss of monetary policy credibility and de-anchoring of inflation expectations.
RBI Deputy Governor and MPC member Michael Debabrata Patra said inflation prints for September and October will need to be monitored carefully to look out for the moderation that its projections anticipate.
"If we tame inflation durably, we will prepare the ground for a long inning of strong and stable growth.Our projections anticipate that growth will gather positive momentum from the second quarter onwards," he said.
The MPC consists of three RBI officials and three government-appointed members. The three government nominees on the MPC are -- Shashanka Bhide, Ashima Goyal, and Jayanth R Varma.
RBI Executive Director Rajiv Ranjan is also on the MPC, the apex rate-setting panel. All six members of the MPC had voted in favour of maintaining status-quo in the policy rate.
RBI Executive Director and MPC member Rajiv Ranjan said with growth and inflation broadly moving in the anticipated direction, monetary policy needs to hold on while earnestly persevering with a disinflationary approach and remaining watchful with readiness to act if the situation demands.
"This calls for continuation of withdrawal of accommodation stance for monetary policy so as to facilitate further transmission of the cumulative policy repo rate hike of 250 basis points on the economy," he said.
Thus, I vote for a pause in the repo rate and continue with the stated stance.
Shashanka Bhide stressed that it is necessary to assess the strength of the growth trajectory and inflation outlook in the medium term keeping in view the fact that the projected headline inflation remains above 5 per cent in the final three quarters of the current financial year.
Ashima Goyal said there are signs of a revival in investment now after more than a decade.
"Sharp financial tightening in 2011 and 2017 punctured such past revivals and led to persistent slowdowns. So it is important to ensure a sustained and sustainable revival this time. There is no excess lending or an infrastructure boom this time, but a healthy gradual rise," she said.
According to the minutes, Jayanth Varma said the changes in the outlooks for both inflation and growth are quite modest, and the real repo rate is already quite high.
"I, therefore, support the decision to keep the repo rate unchanged. In my view, the real interest rate based on projected inflation is high enough to glide inflation towards the target within a reasonable period," the external member on the panel said.
The 46th meeting of the MPC is scheduled for December 6-8.