Mumbai: While the Reserve bank (RBI) had lowered its inflation projection for the current fiscal in its recent monetary policy review and maintained a neutral stance in its policy outlook, the minutes of the MPC meeting revealed that the voices in favour of policy tightening have increased.
Though only one member of the MPC voted in favour of interest rate hike, another member argued for a beginning of “withdrawal of accommodation” in the next MPC meeting in June.
During the previous MPC meeting, only one member was in favour of a rate hike while others favoured a neutral stance.
According to the minutes, a majority of members expressed concern regarding upside risk to inflation stemming from rise in global crude oil price, minimum support price for Kharif crops, the staggered impact of revision in house rent allowance and fiscal slippages by the centre and various state governments.
On the other hand, members remained confident about the recovery in domestic growth highlighting the improvement in investment activity and capacity utilisation though a few members wanted to wait for more data to come in.
Deputy governor Viral Acharya, who advocated a neutral stance in the February review, said the lack of fiscal space to go easy on fuel cesses implies that prices at the pump will likely mirror movements in international prices.
Since global commodity prices as a group are refusing to budge, he said the overall outlook is not comforting from the standpoint of domestic inflation. “I feel it is important to let some more hard data come in, especially on growth, and allow some more time to let the early skirmishes on the global trade front play out. I am, however, likely to shift decisively to vote for a beginning of “withdrawal of accommodation” in the next MPC meeting in June,” he added.
