Not upset about MPC view, flexible inflation targeting has helped: J.R. Varma

livemint.com:

India's flexible inflation targeting has been a useful tool to deal with unexpected shocks of various kinds, said Jayanth Varma, the Monetary Policy Committee's (MPC) consistent dissenter who attended his last meeting as an external member in August. Since his first meeting at the Reserve Bank of India's rate-setting panel four years ago, Varma's view on interest rates and monetary policy stance has diverged from the consensus opinion. At a time of accommodative monetary policy after the pandemic outbreak, Varma had argued for normalizing the policy stance.

Since February this year, he has been voting for a cut in repo rate, citing high real interest rates. He has often argued that tight monetary policy would hurt growth, especially since inflation has largely eased. Varma, a professor of finance at the Indian Institute of Management - Ahmedabad, had joined the Reserve Bank of India’s (RBI's) MPC in October 2020.

A day after the MPC released the minutes of its latest meeting, which kept the repo rate and policy stance unchanged, Varma spoke to Mint in an email interview. “Each member of the MPC brings a different intellectual perspective to the decision-making, and a certain amount of disagreement is inevitable and indeed healthy. It is critically important to see these as intellectual disagreements and not as something about individuals and personalities.

Everybody in the MPC is trying their best to do what they think is right for the country at each point of time. Therefore, as long as my viewpoint is accorded serious consideration, I am not at all upset about this viewpoint not being accepted by the majority," Varma said. In the MPC's minutes, Varma was quoted as saying said that an excessively restrictive policy will