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Negative sentiment had dominated the statements of RBI’s Monetary Policy Committee (MPC) since its first meeting in October 2016 to the latest one in August 2021, according to a sentiment scoring analysis done by professors of Great Lakes Institute of Management, Chennai.
The communication sentiment study of RBI’s MPC statements, done by professors Vidya Mahambare and Jalaj Pathak, was based on analysis of 180 statements of MPC members related to 30 meetings (6 member statements per meeting) held between October 2016 and August 2021.
Negative sentiment
“An overwhelming majority over 83 per cent (149 out of 180 MPC member statements) have a net negative sentiment, reflecting up until 2019 the weak domestic economic environment and from March 2020 the adverse sentiment as a result of the Covid pandemic,” the analysis found.
The study used an improved sentiment analysis technique which assigns a positive or a negative net sentiment score for each statement which is then averaged for every meeting. A negative score can arise due to concerns related to lower domestic/global growth and/or higher inflation and inflation expectations, financial instability, and vice-a-versa for the positive score.
The researchers said that since communication sentiment is not directly quantifiable, researchers have begun to use text analysis techniques to convert the qualitative information contained in central banks’ communication such as monetary policy statements and central bankers’ speeches, into a quantitative indicator.
Also read: MPC Minutes: ‘Not for extended accommodative stance’
“However, there hasn’t been such sentiment analysis of the statements of the Monetary Policy Committee (MPC). This research note is the first attempt to quantify and compare net sentiment in statements of MPC members of India’s central bank, the RBI,” the authors noted.
Out of 30 MPC meetings held until August 2021, the average MPC communication sentiment is negative for 26 MPC meetings, marginally positive for 1 (October 2016), and nearly neutral for 3 meetings (December 2016, April 2018, and February 2021), the report found.
However, the report added that the longest consecutive worsening of the negative sentiment in six MPC meetings was in the pre-Covid period from August 2018 to June 2019.
“Before the pandemic hit, the communication sentiment had begun to improve but hit the lowest point in the statements of March -2020. Since October 2020 once again the sentiments expressed in the MPC statements had improved, before deteriorating again in April 2021 on the expectation of the second wave,” the report said.
“The average net sentiment in the MPC statements remained negative and marginally worsened in the latest August 2021 meeting,” the report concluded.
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