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Letter to BS: MPC's decision shows maturity in thinking and detailed study

The markets were indeed surprised because everyone was hoping that rate cuts will continue

Business Standard 

RBI, reserve bank of india

This refers to the editorial “Inflation warrior” (December 6). You have rightly appreciated the action of the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC). The apex bank, often the target of criticism for kowtowing to the wishes of the government, has done the right thing by not reducing the policy repo rate. The decision shows maturity of thinking, detailed study and logical interpretation of the ground realities and application of mind for arriving at a unanimous decision.

The markets were indeed surprised because everyone was hoping that rate cuts will continue and the cumulative 135 basis points since February will become 160 or more. But the central bank’s role is not only to keep the markets happy. It has a much bigger, overarching role to keep a sharp eye not only on inflation but also on the economic growth in a holistic manner. One must applaud its stand.

Let it continue with the declared stand and also work towards “an appropriate balance between the fiscal and monetary policies”. It is prudent on its part to wait for the Union Budget, give more time to banks to reflect on the effect of earlier cuts in lending rates and perhaps also get a better idea about food inflation.

Krishan Kalra, Gurugram


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First Published: Sun, December 08 2019. 22:52 IST
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