Ashima Goyal and Jayanth Varma, external members of the Reserve Bank of India's monetary policy committee, expressed concerns on Thursday over the "growth sacrifice" because of a restrictive monetary policy,
Growth is robust currently. There was a softening in the first quarter, which could be related to the elections, Goyal in a conversation with NDTV Profit after the release of the minutes of the MPC resolution. "However, we have room to grow further without raising inflation."
"Currently, we are below potential output. Given the high unemployment and given that this is our catch-up period, we should try to grow at the maximum we can with macro stability," she said.
The economy has to grow a lot faster at times when the labour force is expanding. There are two ways to look at growth, according to Varma. "One, that we are the fastest-growing major economy. But the other question is what is the rate of growth that India needs? Where do we stand in the demographic transition? And what was the growth rate that other countries had at the same point in their demographic transition."
Also Read: Are Food Prices Core To India's ‘True’ Inflation? A RBI Study Belies Transitory Food Price
In his minutes too, Varma said one of the things that was probably holding back growth was the excessively restrictive monetary policy. "We need to be on the guard against that and avoid excessive growth sacrifice."
While Goyal and Varma both continued to vote for a 25-basis-points rate cut, the other members of the MPC voted for a status quo due to the elevated food inflation and concerns of spillover effects.
"Inflation expectations need to be kept anchored. Spillovers of food inflation to core have to be avoided," RBI Governor Shaktikanta Das said. "At such a crucial juncture, steady growth impulses are allowing monetary policy to unambiguously focus on supporting a sustained descent of inflation to the target."
Goyal and Varma said that inflation is showing signs of a downward trend. The MPC should give forecasts of core as well as headline inflation, Goyal said.
Watch The Video Here
RECOMMENDED FOR YOU
SBI Economists Forecast 6.5% GDP Growth In September Quarter
Nov 06, 2024
US Tariff Hikes Might Backfire With 'Significant' Initial Impact, Says Citi
Nov 05, 2024
India's Growth To Remain Soft In Q3 In Contrast To RBI Bullishness, Says Nomura
Oct 24, 2024
RBI's Gold Loan Review May Slow Growth, Raise Asset Quality Concerns: Crisil
Oct 22, 2024
POPULAR