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RBI chief keeps his own counsel on interest rates

N. S. Vageesh
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A file photo of RBI Governor D. Subbarao.
A file photo of RBI Governor D. Subbarao.

RBI Governor D. Subbarao once again chose to keep his own counsel in the matter of reducing interest rates at the time of October monetary policy announcement.

Despite five of the six external members of the technical advisory committee recommending a reduction in policy rates, the RBI Governor chose to maintain status quo on repo rates.

The external members of the committee who attended were Y.H. Malegam, Prof. Indira Rajaraman, Prof. Sudipto Mundle, Prof. Errol D’Souza and Prof. Ashima Goyal. Rakesh Mohan and Shankar Acharya could not attend the meeting, though Rakesh Mohan submitted his written views.

The external members felt that even though inflation is sticky, there are no demand pressures and there is a need to revive investments. One member felt that higher growth would help in reducing the fiscal deficit.

Of these five members, three recommended a reduction in repo rate by 25 basis points, while the other two suggested a sharper reduction of 50 basis points.

The RBI has been placing the summary of the views expressed by the advisory committee with a lag of about a month since February 2011. About 30 meetings of the committee have been held so far.

(This article was published on November 22, 2012)
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