For the past year, Reserve Bank of India has been trying hard to maintain growth with measures to control inflation, while increasing interest rates in line with global trends. Although it has continued to increase interest rates in line with the US Federal Reserve's aggressive hikes, the intensity has been comparitively lower. But a member of RBI's Monetary Policy Committee has called the bank's policy complacent with regards to growth.
According to the minutes of this month's MPC meeting, Jayanth Varma said that the 25 basis points repo rate hike wasn't needed. He had voted against the decision, eventually approved by the MPC, citing rising growth concerns and lower inflation. The retail inflation in India had been below the RBI threshold of 6 per cent for two months, but once again surged past that level after the repo rate hike.
This surge to 6.52 per cent has once again cast a shadow of doubt over the possibility of RBI doing away with further repo rate hikes. Varma on the other hand was concerned about higher interest rates leading to unacceptably low growth of FY24. The stock market crash on Wednesday was also attributed to markets crumbling under the pressure of interest rates remaining high for a prolonged period of time.
Varma's objection to the rate hikes was that 6.50 per cent interest overshot the level needed for achieving price stability. On the other hand another MPC member Ashima Goel called for excise tax cuts in the face of persistent inflation.
Citing uncertainty about inflation due to geopolitical fluctuations, RBI governor Shaktikanta Das saw space for recalibrating future monetary policy as per changing conditions, after the 25 basis points hike. So far, the RBI's MPC has been hiking the lending rate for six times in a row.
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