RBI MPC minutes: Economic recovery is at a nascent stage, says Urjit Patel

Effective supply management by government could help in keeping food inflation under check, RBI governor said

Minutes from a Reserve Bank of India (RBI) meeting on Feb. 6-7 showed monetary policy committee (MPC) members expressed concern about accelerating inflation, although that was tempered by uncertainty about the strength of an economic recovery.

RBI governor Urjit Patel said economic recovery is at a nascent stage and called for a cautious approach at this juncture.

"Effective supply management by government could help in keeping food inflation under check," Patel said at the February 2-3 meeting.

"Domestic economic growth impulses are strengthening," he added.

MPC member Ravindra Dholakia said output gap continues to be negative and expanding. 

"Fiscal space to accommodate future higher oil price shocks seems to be absent given fiscal slippage in Budget FÝ19," Dholakia said. 

At the meeting, the MPC voted 5-1 to keep the policy rate on hold at 6% and to retain a 'neutral' monetary policy stance. RBI Executive Director Michael Patra was the sole member to vote for a 25 bps increase.

MPC member Chetan Ghate said there are fewer mitigating factors to rising inflation as compared to two months ago.

"It's highly possible that current growth trends will make economy accelerate into an inflationary phase," he said.