In the minutes of the June MPC meeting, members displayed a strong focus on achieving the 4% inflation target, acknowledging the uncertain inflation outlook due to risks associated with a weak monsoon.
The members emphasized their commitment to reducing inflation to the desired level, recognizing that the process might be gradual and prolonged, as highlighted by Governor Das.
Governor Das stated that, while the MPC was still in a cycle of tightening rates, it would be appropriate to pause the rate hike for the current meeting and carefully assess the evolving situation.
The majority of MPC members expressed optimism regarding the growth outlook, maintaining a projected real GDP growth rate of 6.5% for FY24, with Governor Das and Dr. Patra noting the steady improvement and broad-based nature of growth prospects.
Dr. Ranjan highlighted that economic activity remained strong in Q1FY24, with expectations of continued positive momentum in the subsequent quarters.
However, Dr. Varma held a slightly less positive view, pointing out that several high-frequency indicators indicated that growth was not as robust as desired.
Given the increasing uncertainty surrounding the monsoon and its potential impact on food inflation, the risks in that regard were seen as tilted towards higher inflation.
Additionally, adverse weather conditions affecting rural demand and a potential global slowdown further clouded the growth outlook.
Taking these factors into account, our stance remains in favor of the RBI MPC maintaining a prolonged pause in its policy actions.