Jayanth Varma, MPC's sole dissenter, on inflation, interest rate and MSP
Mint a day after the release of the MPC minutes, Varma said that he expects normalization of interest rates and that his views regarding a rate cut will remain unchanged even if there is the possibility of a hike in minimum support price (MSP) in future. He was the only MPC member to have voted for a rate cut in the February policy meeting. Edited excerpts I think that India has sufficient monetary autonomy to base its monetary actions on the needs of the domestic economy.
Moreover, the statutory mandate of the MPC covers only inflation and growth. External sector considerations are completely outside the MPC's mandate. I do expect a normalization of interest rates in the medium term as inflation converges to the target of 4%.
The pace of this normalization depends on the evolution of inflation projections ahead. The current forecasts already incorporate a high level of food inflation that is being offset by moderation of core inflation. So reasonable increases in MSP would not be a matter of concern from a monetary policy perspective.
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