MUMBAI: Four of the six Monetary Policy Committee (MPC) members expressed hawkish views on policy easing, making a Feb rate cut dependent on new governor Sanjay Malhotra and his incoming deputy. During the Dec 4-6 meeting, 2 out of 6 members voted for a rate cut, with external members Nagesh Kumar and Ram Singh in favour.
Then RBI governor Shaktikanta Das in his last monetary policy committee meeting said, “policy priority at this critical juncture has to be on restoring the inflation-growth balance,” emphasising the need to control inflation. He added, “The fundamental requirement now is to bring down inflation and align it with the target.” In conclusion, Das said, “Any other approach would be counterproductive and a case of inappropriate timing.”
Outgoing deputy governor Michael Patra warned, “It is a durable reduction in inflationary pressures that can rekindle the impulses of growth in a sustained manner.” He noted, “What is worrying is that core inflation has edged up by 70 basis points from its July low. There are early signs of second-order effects or spillovers of high primary food prices – following the surge in prices of edible oils, inflation in respect of processed food prices is starting to see an uptick.”
RBI member Rajiv Ranjan also expressed the need for lower food prices, “At this juncture, confirmation of durable softening of inflation in the coming months is important. The critical factor would be the ongoing rabi season which will give us clarity about the expected correction in food prices.” He pointed out that countries cutting rates remain cautious due to inflation uncertainties, suggesting a similar approach for India.
External member Saugata Bhattacharya acknowledged the adverse shift in the growth-inflation balance and global food price concerns, stressing vigilance. “I had earlier noted the risk of making a ‘policy error’ in my Oct statement; if anything, this risk has now increased,” he said.
In contrast, Kumar highlighted the sharp GDP growth decline, arguing monetary policy has limits in addressing supply-side inflation. He advocated rate cuts to stimulate investment and demand. Singh added that interest rates have “little bearing” on vegetable price volatility and called for a “shift in the monetary policy” to counter the slowdown and boost growth.