Reserve Bank of India Governor Shaktikanta Das told the Monetary Policy Committee meeting this month that the country cannot afford another surge in inflation. He said the best approach at present would be to adopt a dovish stance and wait for inflation to come permanently in line with the central bank’s target. He said this while voting in favor of keeping the repo rate unchanged in the meeting held from October 7 to 9 this month.
No change in repo rate
According to the minutes of the Monetary Policy Committee meeting released on Wednesday, Shaktikanta Das said – Monetary policy can support economic growth sustainably only by maintaining stability at the price level. In the meeting, the Monetary Policy Committee (MPC) decided to maintain the repo rate at 6.5 percent for the 10th consecutive time. Of the six members, five voted in favor of it while one voted in favor of reducing it. However, the committee unanimously decided to change its stance to neutral by withdrawing its earlier liberal stance.
First meeting after reconstitution of MPC
This was the first meeting of the MPC after its reconstitution. The three newly appointed external members are Ram Singh, Saugata Bhattacharya and Nagesh Kumar. According to the minutes of the meeting, Shaktikanta Das said that monetary policy can sustainably support economic growth only by maintaining price stability. Taking all things into consideration, I vote to change the current stance to neutral while keeping the repo rate unchanged at 6.5 percent, he said.
Shaktikanta Das’s estimate
Shaktikanta Das said that overall the Indian economy presents a picture of stability and strength. There is a balance between inflation and growth. He said that despite the near-term rise in inflation, headline inflation is expected to remain around the four per cent target at the end of the year and early next year.
What did the Deputy Governor say?
Echoing similar views, RBI Deputy Governor Michael Debabrata Patra had said that until inflation comes permanently close to the target, it would be appropriate to take a wait and evaluate approach with respect to the policy rate. They voted to maintain status quo on policy rates but move to neutral at the meeting.
Another member, RBI Executive Director Rajiv Ranjan, had said that between now and December, things will become more clear on some of the uncertainties. These uncertainties include the US elections, risks globally and Chinese fiscal stimulus and global commodity prices.
