The debate cannot stop with the RBI repo rate and rate transmission issues. It has to go beyond, into whether credit is reaching the last mile
The third bi-monthly monetary policy decision on 2 August to reduce the policy repo rate by 25 basis points was widely anticipated. I am not going to join the feverish discussion on the quantum of the repo reduction (too little, too late?), how much will be transmitted, and whether whatever is transmitted will have any impact on the real economy. While evaluating decisions of the monetary policy committee (MPC), it has to be remembered that they have been given a blinkered mandate, a single instrument (the repo rate), and a single inflation outcome scale on which they will be judged. If asked what their decision will do for the real economy, they could quite legitimately respond that the question falls outside the syllabus on the basis of which they are taking their bi-monthly exams.