Data explainer: Decoding the dissent of RBI’s doves, in 5 charts
NEW DELHI : Jayanth R. Varma joined the Reserve Bank of India’s (RBI's) monetary policy committee (MPC) in October 2020, and in his very first meeting, he dissented. Ashima Goyal, who was appointed at the same time, has since emerged as the only other dissenting voice, albeit not as often as Varma, who was a hawk initially, but turned dovish in the middle of 2022.
Goyal has always had a dovish tilt. Both these members, whose tenure on the panel will end after the August meeting, have sparked a debate about whether staying with a tighter monetary policy will end up hurting growth, especially since inflation has now largely eased. Varma had been voting for a reduction in the benchmark repo rate since February, but with Goyal also joining in earlier this month, his case has grown stronger.
Both invoked high real interest rates to argue their point, as per the minutes of the latest meeting, while the other four members voted to keep the repo rate unchanged at 6.5%. Real interest rate refers to the inflation-adjusted cost of borrowing or return on investments. There is no official definition, or an ideal level.
The common definition (i.e. the gap between the policy repo rate and the expected inflation), would indeed put it quite high at 2%, the highest in the post-pandemic era and the second-highest since 2016. Goyal feels it has space to come down to 1% without hurting growth; Varma says 1–1.5% would be sufficient to glide inflation to the target of 4%.
India’s gross domestic product (GDP) growth is expected to slow down to 7.2% this year from 8.2% in 2023-24. But the better-than-expected growth in 2023-24, too, came on the back of a statistical boost from high net taxes and a low deflator. On top of it, private consumption
. Read more on livemint.com
