India rate panel concerned on growth, some flag inflation risks
By Suvashree Choudhury and Swati Bhat
MUMBAI, April 18 (Reuters) - India's interest rate setting
panel expressed concerns over a slowing economy, according to
minutes of its latest monetary policy meeting released on
Thursday, even as a few said they feared a bounce-back in
Most of the six-member Monetary Policy Committee (MPC)
agreed on the need to lower interest rates and boost growth as
inflation stayed muted, the minutes showed.
The MPC lowered the repo rate by 25 basis
points to 6.00 percent two weeks ago in a 4-2 vote, the second
in a row since February under new Reserve Bank of India (RBI)
Governor Shaktikanta Das, who was appointed after the exit of
his predecessor Urjit Patel in December.
"With the inflation outlook looking benign and headline
inflation expected to remain below target in the current year,
it becomes necessary to address the challenges to sustained
growth of the Indian economy," Das wrote in the minutes,
released by the central bank.
A minority of MPC members warned that a bad monsoon could
push up food prices and drive up inflation above the RBI's 4
India's March consumer inflation was an annual
While the state-run India Meteorological Department predicts
average monsoon rains this year that should support agricultural
production, Skymet, India's only private weather forecasting
agency, said this month rainfall could be below normal.
"Soft food inflation may not persist for long," warned RBI
deputy governor and MPC member Viral Acharya who voted against a
rate cut, adding that it could steer "headline inflation away
from the target rate of 4 percent".
Monsoons are crucial for India's food prices and economic
growth with half of the country's farmland lacking irrigation.
Irregular rains could push up food prices that have been falling
for four months and further slow down an economic recovery if
the rural economy suffers.
"It wouldn't hurt to wait for a couple of months to watch
the momentum on food inflation and other variables before taking
a call on further rate cuts," said another MPC member, Chetan
Ghate, who wanted the repo rate to remain unchanged.
India grew at 6.6 percent in the December quarter, its
slowest in five quarters on weak consumer demand and muted
private investment. The slowdown has continued amid weak auto
sales, tighter financing conditions and slow growth in jobs.
One MPC member, Ravindra Dholakia, known for his dovish
stance and pro-growth bias, argued his case for a cut with a
"When the pitch is favourable and no possibility of bouncers
or googlies coming in, a well-set batsman has to score and not
miss the opportunity to build the total by defending
unnecessarily," Dholakia said.
(Reporting by Suvashree Dey Choudhury, Swati Bhat, Euan Rocha,
Abhirup Roy, Sankalp Phartiyal and Sudipto Ganguly
Editing by Robert Birsel)
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