Subbarao unyielding on rate cut

The Reserve Bank of India (RBI) Governor D Subbarao was firm on maintaining status quo on repo rate, notwithstanding a majority of members of a RBI committee favouring a rate cut ranging from 25 to 50 basis points (bps).

Minutes of the Meeting of the Technical Advisory Committee (TAC) on Monetary Policy held on October 23, 2012 released by the bank on Wednesday reveal that five of the six external members on the TAC suggested a rate cut to revive investments, despite inflation being “sticky.”

One of the members was of the view that higher growth would enable in reducing fiscal deficit. While three of them suggested a 25 bps rate cut, two were in favour of reducing it by 50 bps, the minutes reveal. Only one member was in favour of “no change” in the monetary policy as he felt the decline in growth rate was due to fiscal factors.

The TAC meeting was chaired by D Subbarao, Governor and attended by internal members comprising Deputy Governors Subir Gokarn (Vice-Chairman of TAC), K C Chakrabarty and Anand Sinha. The external members on the TAC were Y H Malegam, Indira Rajaraman, Sudipto Mundle, Errol D’Souza and Ashima Goyal.

The meeting was als attended by RBI officials Deepak Mohanty, Michael D Patra B.K. Bhoi, B M Misra and Pardeep Maria. Since February 2011, the central bank has been placing the main points of discussions of the TAC on Monetary Policy meetings in the public domain with a lag of roughly four weeks after the meeting.