MUMBAI: New external members of the monetary policy committee (MPC) share RBI members’ neutral-to-dovish outlook. But while RBI members’ dovishness arises from optimism that things will improve, external members are more worried about a slowdown.
Nagesh Kumar, one of the three new external members, called for the loosening of monetary policy, emphasising on slowing economic growth and demand deficits in the domestic and external markets, minutes of the MPC meeting released on Wednesday showed.Kumar was the only member to have voted for a 25 basis point rate cut in the October 9 MPC meet, while others voted for a pause.
“Demand deficits may be the reason private investment has not picked up momentum despite companies’ healthy balance sheets and all the reforms and incentives extended by govt,” Kumar said. He also highlighted how the rise of protectionism in the West, trade wars, and the collapse of multilateral trade negotiations had turned globalisation into ‘slowbalisation”.
External member Saugata Bhattacharya advocated a neutral stance and was concerned about loss of growth momentum, uncertain aggregate demand, and external risks, including geopolitical factors and rising commodity prices. He presented a mixed picture of the economy, acknowledging some positive signals but expressing concerns about indicators such as the slowdown in manufacturing and personal vehicle sales, subdued rural wages, and tepid export growth.
The third new member Ram Singh was optimistically dovish and acknowledged resilient domestic growth driven by consumption and investment.