MPC minutes show continuing divide over policy action timing

The rate-setting panel of India's central bank remained divided over the timing of monetary policy action aimed at reviving India's economic growth, even as they expect price rise to cool off, show minutes of the 6 December meeting, released on Friday.

- Gopika Gopakumar

All three Reserve Bank of India (RBI) members in the six-member monetary policy committee (MPC) insisted that maintaining policy status quo was essential to bring down India's inflation closer to the regulator's 4% medium-term target to support faster growth.

These three, and one external member, voted to keep the repo rate, its key policy rate, on hold.

The other two external members—Nagesh Kumar and Ram Singh—voted for a 25 basis points reduction, pointing to slowing economic growth and dim expectations of an impact on food inflation from a repo rate hold. A basis point is one-hundredth of a percentage point.

Kumar and Singh believe lower interest rates are necessary to boost India's economic growth, which they expect will eventually contain inflationary pressures.

The MPC earlier this month decided to keep the repo rate unchanged at 6.5% for the 11th successive time, even as India's gross domestic product (GDP) in the July-September period grew at its slowest pace in seven quarters and inflation softened in November.