The monetary conundrum

Decisions from here on will need to be more considered

Breaking from convention, the monetary policy committee (MPC) of the Reserve Bank of India (RBI) decided to reduce the policy repo rate by 35 basis points (bps) in its August meeting. It was then reasoned that a 25 bps cut would have been insufficient and a 50 bps reduction excessive. The macroeconomic outlook has changed significantly since then and policy making has become more challenging. Growth in the Indian economy collapsed to a six-year low of 5 per cent in the first quarter of the current fiscal year. Had the MPC anticipated the extent of the slowdown, a cut of