'Excessively restrictive' MPC may be sacrificing India's growth potential, says dissenting member Jayant Varma
Monetary Policy Committee (MPC) member Prof. Jayant Varma raised concerns over the impact of the current monetary policy stance on the country's economic growth, the minutes of August meeting showed on Thursday.
He argued that the policy, which he believes is excessively restrictive, is sacrificing growth potential at a time when India's economy could be accelerating.
Varma, an external member of the MPC, had voted for a cut in repo rate during the meeting which took place on August 6-8. The committee, however, decided to keep the policy rate unchanged at 6.50 per cent with a 4:2 majority.
India's real GDP has been estimated to grow by 8.2 per cent in FY24 as against 7.0 per cent in FY23. Meanwhile, the MPC has kept the real GDP forecast for FY25 unchanged at 7.2 per cent with Q1 slightly reduced to 7.2 per cent; Q2 at 7.2 per cent; Q3 at 7.3 per cent; and Q4 at 7.2 per cent.
«For the last several meetings, I have been expressing concerns about the unacceptable growth sacrifice induced by a monetary policy that is excessively restrictive. The majority of the MPC however do not share this concern, perhaps
because they think that the Indian economy is already growing at close to its potential growth rate. I think that such a view reflects (a) an unwarranted pessimism about the growth potential of the economy and (b) an overly sanguine expectation about growth in ensuing quarters. I disagree with both prongs of this assessment,» Varma said as per the MPC's minutes.
Jayant Varma, who had been voting for a since
