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The past two meetings of the RBI’s six-member Monetary Policy Committee represent a slight change from the usual “unanimous” or consensus view that is projected in the policy announcement.
There have been six such meetings of the committee since it was constituted a little over a year ago. The first four meetings reflected what could be dubbed ‘group think’. There was unanimity on the course of action to be taken.
‘Too cautious’In the last meeting held in June, Prof Ravindra Dholakia, IIM-A, pleaded strongly for a 50 basis points cut in rates while the other five members voted to maintain status quo and not change rates.
In his statement at the meeting then, Dholakia drew attention to the fact that inflation had been falling steadily in line with his predictions whereas the RBI’s predictions were too cautious.
Further, he pointed out that the anticipated rise in inflation on account of implementation of the Seventh Pay Commission recommendations was a trifle overstated because the RBI presumed that the implementation would be immediate and simultaneous by all States — which has not been the case.
According to the minutes of the meeting released a fortnight later, he had said, “Becoming too overcautious under such circumstances is against the principle of prudence.
“In fact, prudence lies in creating space when conditions are favourable and risks are not high than waiting and losing the opportunity.
“In case the conditions were really to turn unfavourable in future, the costs to the society would be severe if during the right time expansionary policies are not followed.”
In today’s meeting, he has again likely reiterated his plea. What is evident from the statement released by the RBI is that he had called for a 50 bps cut once more.
The other members chose to be cautious and conservative again and went only with a 25 bps cut.
One member decided even that was too much and voted for status quo.
Market observers think the different views are welcome and reflect a vibrancy that will enhance the quality of decisions.
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