MPC minutes: Several risks to projected inflation trajectory, says Patel

Food inflation, led by vegetables, remains highly variable and there are several risks to projected inflation trajectory, said RBI chief Urjit Patel during the December Monetary Policy Committee meeting.

Deputy governor Viral Acharya said headline inflation will most likely cross 4% rather soon and remain above target in medium term, MPC minutes revealed.

Acharya also said that there seems little scope for accommodation or for change of stance at the present juncture. 

MPC member Chetan Ghate said uncertainty because of geopolitical events could push up the price of crude higher. 

"The conquest of Indian inflation is certainly not a done deal," Ghate said.

"Fiscal slippage concerns linger on and recent upturn in crude oil prices has emerged as a source of concern," Patel said. 

Patel added that several uncertainties, especially on fiscal, external fronts persist and it's important to be vigilant.

MPC member Ravindra H Dholakia said he is not in agreement with the assessment of RBI for both CPI inflation, growth prospects in near term. 

He said he 'doesn't share RBI's over-concerns for upside risks on inflation and over-optimism on economic growth front'. 

"Fiscal space is more or less exhausted but space for monetary boost has fortunately been available now for a relatively long period," Dholakia said. 

"Economic recovery would have been far more rapid if rates had been cut in June 2017. Companies still lack pricing power and are experiencing squeeze in their profit margins," he added. 

"Oil prices in my opinion are not likely to stay significantly higher than current level for any longer time," the former IIM professor Dholakia said.

MPC member Michael Debabrata Patra said projections indicate that inflation prints are likely to stay above target from here on.

"As growth regains solid ground, it could likely sustain inflation above the target," Patra said.

"In my view, it is time now to commence withdrawal of accommodation, consistent with evolving stance of liquidity management," Patra added.

MPC member Pami Dua said RBI's surveys indicate performance of services and infrastructure sectors are expected to improve in the fourth quarter.