As India’s economic growth has lost some momentum due to a third wave of COVID-19 and inflation is on a downward trend, the country’s monetary policy committee has chosen to maintain its policy stance and stance, minutes show of the February 10 meeting.
“Inflationary pressures in India continue to come largely from supply-side factors, and the recent printout also reflects unfavorable base effects,” said Shaktikanta Das, governor of the Reserve Bank of India (RBI), in minutes released Thursday.
“The expected moderation in the inflation path in the coming fiscal year offers scope for accommodative monetary policy. At the same time, the economic recovery from the pandemic remains incomplete and uneven, and continued support from various policy areas remains crucial for a sustainable recovery.”
Consumer prices in India rose 6.01 percent in January compared to the same month last year, compared to a revised 5.66 percent year-on-year increase in December, boosted by rising costs of food, fuel and household items.
But the RBI’s Monetary Policy Committee (MPC) left the benchmark repo rate unchanged at 4.0 percent, maintaining its accommodative policy stance at its last meeting.
RBI Deputy Governor Michael Patra said messages from incoming high-frequency indicators were mixed, justifying policy support, as inflation neared an inflection point and was expected to follow a downward path through 2022/23.
However, the lone dissenter in the MPC, outside member Jayant Varma, said that since monetary policy operates with lags, it was important to define policies that look three to four quarters ahead of the expected state of the economy and not in terms of where. it was at that time. of the meeting.
Varma said that while data and projections suggested that real interest rates should remain low, they should turn slightly positive in 2022/23 and there would be a need for modest increases in nominal interest rates.
Varma, like others, voted to keep the repo rate at 4 percent but voted against keeping the stance accommodative on two counts.
“First, a switch to neutrality is long overdue. Second, the continued insistence on fighting the ill effects of the pandemic has become counterproductive and diverts the MPC’s focus from the core issue of addressing the recession trends going back at least to 2019,” he wrote.