Rate cut to boost private consumption, investment: RBI governornment
The minutes of the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) meeting showed that with the inflation decisively around 4 per cent target and growth is still moderate and recovering, the monetary policy needs to nurture demand impulses to boost growth amid uncertain global environment, opined the members of the Reserve Bank’s rate setting panel while delivering another 25-bps rate cut earlier this month. Monetary Policy Committee (MPC) headed by Governor Sanjay Malhotra had reduced the short-term lending rate by 25 basis points to 6 per cent on April 9. Meanwhile, a similar reduction was done in February. The RBI also changed its monetary stance to ‘accommodative’ from ‘neutral’.
As per the minutes, RBI Deputy Governor has warned that the GDP growth could face a downward pressure despite of inflation outlook remaining benign. More on growth prospects, RBI’s Executive Director and MPC member Rajiv Ranjan stated that while growth is still reasonable, it is lower than their aspirations, highlighting that the country’s forte is its higher growth potential supported by strong macroeconomic, fundamentals and requires policy impetus amidst a challenging global environment.
Meanwhile, the external MPC member Nagesh Kumar, who like others voted for 25 bps reduction in repo rate, has emphasized the need of protecting domestic industry amidst changing global trade dynamic stating, the country needs to take action to protect the domestic industry from the dumping of Chinese goods, especially in labour-intensive consumer goods like garments, imitation jewellery, non-leather footwear, toys, and furniture where it is already rampant. He added that the ongoing FTA negotiations with the EU and UK need to be concluded quickly to preserve market access for Indian products in these markets. In the support of repo rate cut, the external MPC member Ram Singh, was of the opinion that overall, the inflation outlook has improved decisively, and confidence in a durable alignment of headline inflation with the target of 4 per cent over a 12-month horizon has improved.
