While there is policy space to further cut the policy rate, this is not the opportune time for the same as it will not have the desirable impact, Reserve Bank of India (RBI) Governor Sanjay Malhotra said in the Monetary Policy Committee minutes published on Wednesday.
The RBI MPC, led by the Governor, retained the benchmark repo rate at 5.5% at its meet earlier this month. The RBI revised the consumer price index (CPI) inflation forecast downward while revising the Gross domestic product (GDP) growth forecast upward at the meet.
Explaining the rationale behind his vote to retain the benchmark lending rate at 5.5%, he said that several growth-inducing policies unveiled by the Government and the Reserve Bank should help growth, going ahead. The cumulative impact of fiscal and monetary measures is yet to be realised fully, he said, adding that tariff-related uncertainties are still evolving and there is elevated uncertainty on the external front.
Even though growth is strong by current reckoning, its outlook is softer and is expected to be below our aspirations. The benign outlook for headline and core inflation as a result of the downward revision of projections opens up policy space to further support growth.
The intent of policy, nevertheless, is to continue to facilitate growth-enabling conditions, the Governor said. Explaining his decision to maintain stance at neutral, a change would tantamount to giving a definitive forward guidance about the future trajectory of the policy rate, he said.
