Mumbai: In what could mean further rate cuts by India's central bank, RBI Governor Shaktikanta Das has said at the bi-monthly monetary policy committee (MPC) meeting here earlier this month that "there is policy space to address growth concerns", according to the minutes of the MPC meeting.
In 2019, the Reserve Bank of India (RBI) has delivered 135 basis points (bps) of cuts in its key lending rate. Das, according to the minutes, saw domestic demand moderating significantly.
"As the inflation scenario remains benign with headline inflation projected at below target in the remaining period of 2019-20 and in Q1:2020-21, there is policy space to address growth concerns," Das said.
"The weakening of private consumption, which, for long, has been the bedrock of aggregate demand, in particular, is a matter of concern," the Governor added.
Besides, a number of MPC members expressed concerns over the transmission of rates. While Das said that "monetary transmission has remained weak" external member Chetan Ghate said the "monetary transmission has worsened since the last review".
Das, however, cautioned the government, saying that "there is also a need to be watchful of the fiscal situation; however, the government has indicated that it would maintain the fiscal deficit".
On the road ahead, MPC member Michael Debabrata Patra stressed that a full throttle effort by all arms of macroeconomic management is the need of the hour.
The RBI on October 5 announced a 25 basis point rate cut in its repo, or short-term lending rate for commercial banks, to 5.15%, from 5.40%, after the rate of gross domestic product growth during the first quarter slumped to 5%.
