2 min read.Updated: 21 Feb 2019, 07:03 PM ISTSuvashree Choudhury,Reuters
India needs to take steps to boost economic growth as the inflation outlook remains low, RBI MPC minutes show
Retail inflation one-year ahead is projected to remain below target level of 4%, says Shaktikanta Das in MPC minutes
Mumbai: India needs to take steps to boost economic growth as the inflation outlook remains low, the Reserve Bank of India's monetary policy committee (MPC) said in minutes released on Thursday. Most of the six-member MPC were in favour of spurring growth in Asia's third largest economy amid a soft inflation outlook on a sustained fall in food prices, minutes of the February MPC meeting showed.
The MPC meeting was the first for RBI governor Shaktikanta Das after the abrupt exit by his predecessor, Urjit Patel. Patel was known for his hawkish stance on interest rates, but Das downplayed inflation concerns and hinted at more rate cuts.
"The overall food outlook remains benign and the headline inflation one-year ahead is projected to remain below the target level of 4%," Das said in the MPC minutes.
"The neutral stance will provide flexibility and room to address challenges to sustained growth of the Indian economy over the coming months, as long as the inflation outlook remains benign."
Softer interest rates will be good news for Prime Minister Narendra Modi's government which wants to boost lending and lift growth ahead of elections to be held by May.
Das, RBI executive director in charge of monetary policy department Michael Patra and external members Ravindra Dholakia and Pami Dua voted in favour of a 25 basis points rate cut while another external member, Chetan Ghate, and RBI deputy governor Viral Acharya called for a hold.
One basis point is one-hundredth of a percentage point.
The MPC also noted the global uncertainties over trade frictions, Brexit and oil prices could add to growth headwinds back home even as most central banks have moved firmly away from last year's tightening moves.
The US Federal Reserve on Wednesday affirmed it would be "patient" on further interest rate rises after four in 2018, further cooling off rate hike expectations.
Reuters's Swati Bhat, Euan Rocha, Abhirup Roy, Promit Mukherjee and Sudipto Ganguly contributed to this story.
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