Four months ago, when the Monetary Policy Committee (MPC) revealed the emergence of discord among members, the steadfastly hawkish Michael Patra had argued that the record low retail inflation then was set to rebound sharply. Patra is executive director in charge of the monetary policy department at the Reserve Bank of India (RBI).

On the other end of the spectrum, the dovish Ravindra Dholakia, a government nominee, had argued for a steep rate cut on the basis of sagging investment demand.

Data since then has vindicated Patra’s stance, making his earlier statements look more reasonable than odd. Two meetings since then, the discord has remained and Dholakia has pleaded for a rate cut again, the minutes of the last MPC meeting show. However, in a rare event, Patra has this time around expressed his worry on the comatose investment climate.

While the worry is shared by all members, there is an emergence of a calculated hope among them. Patra’s argument that the three-year low GDP (gross domestic product) growth in the quarter ended September will rebound finds resonance with governor Urjit Patel, deputy governor Viral Acharya, and even members Chetan Ghate and Pami Dua.

Patel points to various high frequency data that suggests GDP growth has hit a trough. Of course, the revival will be through consumption demand—mainly from rural India, which is currently enjoying a rise in wages—as well as through strong services growth. The arguments seem plausible especially when Ghate points to a study that shows fluctuations in output are rarely driven by monetary policy, owing to weak transmission of policy rate changes.

What this also shows is that MPC is cognizant of the deep malaise in the economy but feels that the correction is a long-drawn process and that there is no quick fix. Rekindling investment will happen only once the balance sheets of banks are fixed and corporates finish their deleveraging process. Acharya and Patel reiterate the importance of both, with Patel adding that various other constraints also need to be removed.

Just as RBI was not willing to cut rates based on a collapse in inflation for a quarter, it is not willing to cut rates on the back of only a one-quarter GDP data point. Barring Dholakia, most members believe growth will revive in the second half of fiscal year 2018.

So to answer the question asked in the headline, it turns out, four out of the six members of MPC are not too worried on the growth front. Ghate and Dholakia are more perturbed than the rest.

But will RBI start hawking policy rate hikes soon given the strong comments on inflation? Patra believes that MPC should gear up to start thinking of hikes. It would be interesting to see whether data vindicates him again.

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