RBI shows the dull but venerable art of batting with a straight bat

livemint.com:

If ever there was a case for the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to present a straight bat, and not attempt any theatrics, Friday, 5 April 2024, was the day. With the economy doing well, inflation down, if not out, and general elections looming ahead, it made no sense to rock the boat.

Not after the central bank had come in for lavish praise from both Prime Minister Narendra Modi (“RBI, with its success in managing inflation and growth, despite the pandemic and two wars, can be a role model for other central banks") and finance minister Nirmala Sitharaman (“RBI stands tall among its peers on several counts") at the celebrations held on 1 April to mark the 90th anniversary of RBI’s commencement of operations on 1 April 1935. So, in the last MPC meeting before the elections and the first in this fiscal year, the rate-setting committee did exactly what was expected—it kept rates on hold (for the seventh consecutive time) and said it remained focused (as before) on the withdrawal of liquidity.

It cannot be faulted for inconsistency. If it felt growth was doing quite well and the inflation-growth dynamics did not warrant any change in policy rates at its meeting in February 2024, when National Statistical Office (NSO) estimates placed 2023-24 gross domestic product (GDP) growth at 7.3%, there was even less of a case for any rate action to support growth now that the economy is doing better (the latest official estimates place GDP growth higher at 7.6%).

Clearly, the MPC, like the US Federal Reserve, has a problem on its hands. Its ‘higher for longer’ policy doesn’t seem to have impacted growth adversely.