The Reserve Bank of India’s (RBI) monetary policy committee (MPC) according to minutes published on Wednesday, has decided to take measures to ensure that inflation remains within the target going forward, while supporting growth. The objective is to achieve the medium-term target for consumer price index (CPI) inflation of 4 per cent while keeping it within the target band of 2-6 per cent. The annual retail inflation rate rose to 6.52 per cent in January from 5.72 per cent in December, on higher food prices. “The monetary policy stance will need to remain disinflationary till inflation is returned to target,” said RBI deputy governor Michael Patra. “Global outlook has complicated the fight against inflation,” he added.
RBI Governor Shaktikanta Das said, “Tapered rate increase of 25 bps provides space to calibrate future monetary policy actions.” He added, “ It is inadvisable to provide specific guidance when we are in a tightening cycle.” However, member Jayanth R Varma voted against the rate hike. “We are paying the price for complacent H2 FY22 policy on inflation. Hope we don’t pay price for complacency on growth FY24. 25 bps rate hike not desired due to concern over growth,” Jayanth R Varma said.
Earlier in February, the Monetary Policy Committee (MPC) had announced a hike in the key repo rate by a quarter percentage point to 6.50 per cent, and left the door open to more tightening, maintaining that core inflation remained high. Shashanka Bhide, Rajiv Ranjan, Michael Debabrata Patra and Shaktikanta Das voted to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. Ashima Goyal and Jayanth R. Varma voted against this part of the resolution.
The RBI minutes of the meeting maintained that the outlook for inflation is mixed. Even as prospects for the rabi crop have improved, especially for wheat and oilseeds, there are still risks from adverse weather events. The global commodity price outlook, including crude oil, is also uncertain. It maintained that the stronger prospects for agricultural and allied activities will give a push to rural demand and the rebound in contact-intensive sectors and discretionary spending is expected to support urban consumption.
The RBI meeting concluded that the real GDP growth for 2023-24 is projected at 6.4 per cent. India’s foreign exchange reserves were placed at US$ 576.8 billion as on January 27, 2023. “Overall monetary and liquidity conditions remain accommodative, said RBI Governor Shaktikanta Das.
RBI Governor-led MPC meeting reviewed the surveys conducted by the RBI to gauge consumer confidence, households’ inflation expectations, corporate sector performance, credit conditions, the outlook for the industrial, services and infrastructure sectors, and the projections of professional forecasters.