RBI has wisely charted a course that’s unique to India’s economy
A week is a long time in politics," said former British prime minister Harold Wilson, briefing journalists at the time of a sterling crisis. It was in the mid-1960s and Wilson was referring to the far-reaching fallout of the crisis. Close to 60 years later, I could perhaps be pardoned for tweaking Wilson’s quote to suit the world of macroeconomics.
Going by the events of the past few days, a week could have been a long time in monetary policy. Except that, to its credit, the Reserve Bank of India (RBI) chose to stay the course. Contrary to what many, especially market aficionados, were hoping.
Consider. Till just about a week ago, it was a given that RBI’s rate-setting Monetary Policy Committee (MPC) would settle for a relatively pedestrian monetary policy statement. Sure, the six-member MPC already had two dissenters, Jayanth Varma and Ashima Goyal, both of who had argued (at the last meeting in June) for a reduction in the policy (repo) rate and a change in stance from ‘focused on withdrawal of accommodation’ to ‘neutral.’ But the composition of the Committee—three members from RBI and three external members, combined with a casting vote given to RBI Governor Shaktikanta Das in the event of a tie—means the Governor’s word usually prevails.
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