RBI-MPC’s decision on repo rate may be unanimous but not on the stance: Economists

By Venkatachari Jagannathan
Chennai, Oct 2 (IANS) While there will be unanimity on not changing the repo rate from the current 6.5 per cent, there will be divergence within the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) as to the stance, said senior economists.

The six-member MPC will meet from Wednesday to Friday.

The decision of the MPC will be announced by Das on Friday.

Senior economists have told IANS that the MPC will not change the repo rate nor it may resort to other means to control liquidity.

Whether the MPC’s decision will be unanimous or will there be divergent views is the question that hangs now.

“In our opinion, there will be no divergence of views on the rate pause decision, 6-0. But as earlier, there is likely to be one dissent on continuing the existing monetary stance, 5-1,” Suman Chowdhury, Chief Economist & Head - Research, Acuite Ratings told IANS.

“Looks like that unanimous on repo while stance on withdrawal of accommodation will be 5:1,” Madan Sabnavis, Chief Economist, Bank of Baroda told IANS.

“I believe the decision should be unanimous,” Sujan Hajra, Chief Economist & Executive Director at Anand Rathi, told IANS.

The MPC comprises of Dr. Shashanka Bhide, Honorary Senior Advisor, National Council of Applied Economic Research; Dr. Ashima Goyal, Emeritus Professor, Indira Gandhi Institute of Development Research, Mumbai; Prof. Jayanth R. Varma, Professor, Indian Institute of Management, Ahmedabad; Dr. Rajiv Ranjan, Executive Director, RBI; Dr. Michael Debabrata Patra, Deputy Governor, RBI; and Chairman Shaktikanta Das, RBI Governor.

In the previous MPC meeting held from August 8-10, the members unanimously decided to retain the repo rate -- the rate at which RBI lends to banks -- at 6.5 per cent, while there was on divergent view on the withdrawal of accommodation stance.

At the August 2023 MPC meeting, Varma had said: “I vote for keeping the repo rate unchanged in this meeting. I am of the view that the current level of the repo rate is high enough to bring inflation below the upper tolerance band on a sustained basis and also glide it towards the middle of the band.

“Turning to the stance, my reservations remain the same as in the past. However, this would be the third successive meeting at which the repo rate has been left unchanged (assuming that the MPC decides to pause now). This disconnect between stance and action has completely hollowed out whatever meaning the stance might have originally had, and turned it into a harmless ritualism. So I am content with expressing reservations about the stance."

(Venkatachari Jagannathan can be reached at [email protected])