The minutes of the Technical Advisory Committee (TAC) on monetary policy held prior to the RBI's fourth Bi-monthly Monetary Policy on September 30 revealed that four out of seven external members favoured reduction in repo rate.
"Four (external) members recommended that the policy repo rate be reduced. Three of the four members suggested a reduction by 25 basis points," the minutes said.
One member, the minutes said, recommended a sharper reduction of 50 basis points with an emphatic forward guidance that there will be no further follow up of the rate cut.
According to these members, since industrial demand is stagnating, some focus on the more pressing need of weak demand and high levels of unemployment would be consistent with fighting inflation.
"With the decline in headline CPI inflation, the real policy rate has become positive. Positive real rates were required by the RBI to meet its 6 per cent target by January 2016.
"If inflation reduces further, the real policy rate will keep on increasing. Therefore, they were of the view that at this juncture, the Reserve Bank can afford a reduction in the repo rate by 25 basis points," it added.
Rajan, however, left all key rates unchanged citing continued risks to inflation and difficult external situation especially on the geopolitical front. The repo rate stands at 8 per cent since January.
Three of the seven external members, however had recommended no change in the policy repo rate.
"They voted against a cut in the repo rate in this policy announcement. They were of the view that if the pace of disinflation is faster than what is anticipated now, then there may be a case for a rate cut, particularly if inflation expectations also soften," the minutes on RBI's website said.
The external members on TAC who attended the meeting were Y H Malegam, Shankar Acharya, Arvind Virmani, Indira Rajaraman, Errol D'Souza, Ashima Goyal, and Chetan Ghate. The meeting was chaired by Rajan.