Mumbai: The panel that advises the Reserve Bank of India (RBI) on monetary policy was not in favour of a rate hike, the edited minutes of their meeting shows.
Only one external member of the RBI’s technical advisory committee, out of six, was in favour of a 0.25% hike in policy rate in October even as they agreed that the message of RBI’s policy should be hawkish.
The RBI hiked the policy rate by 0.25% to 8.50% in its second quarter monetary policy review in October.
This is not the first time RBI ignored the panel’s advice. In its first quarter policy review also, RBI had ignored the panel’s recommendation. The panel is advisory in nature and its recommendation is not binding on RBI.
RBI doesn’t publish the minutes of the meeting but puts out an edited version on its website.
While the members of the panel were not very hopeful about a global recovery, they also felt that the domestic growth was moderating. “In particular, investment activity was slowing down due to tight monetary policy and several other factors, including global uncertainty and delay in clearing the projects,” the minutes released on RBI website on Thursday read.
RBI has hiked its policy rates 13 times since March 2010 to reign in a persistently high inflation. In the second quarter policy review, however, it said it may not be hiking rates in this cycle.
All the members felt that inflation was a major concern and would not ease immediately. According to most of them, the inflation is because of supply-side problem and “the monetary policy tightening was impacting investment and growth and not inflation.”
The panel is chaired by RBI governor D. Subbarao and has deputy governors as members. The external members include Shankar Acharya, Y.H. Malegam, Sudipto Mundle, Errol D’Souza, Ashima Goyal and Rakesh Mohan.