MUMBAI: Less than a week before the Monetary Policy Committee (MPC) meets to review rates for the first time since the US began easing, investors in Mumbai do not have much to glean the leanings of the three new external members joining the panel. But analysts broadly agree the newcomers are unlikely to call for a tilt in policy away from the MPC’s current focus: A durable retreat in inflation.
On Tuesday, the government reconstituted the six-member MPC, appointing three new external members for a four-year term. The new members are Ram Singh, Saugata Bhattacharya and Nagesh Kumar. Singh is director, Delhi School of Economics, Bhattacharya an independent economist, was formerly chief economist at Axis Bank, while Kumar is director and chief executive at the Institute for Studies in Industrial Development, New Delhi.
The other three members – Reserve Bank of India (RBI) governor Shaktikanta Das, RBI deputy governor Michael Patra and RBI executive director Rajeev Ranjan – continue to hold their posts.
The MPC’s next meeting is scheduled October 7-9. Most economists were of the view that the rate-setting panel would keep interest rates unchanged and take more time to assess the sustainability of the decline in inflation over the past few months.
“The upcoming meeting will have three new MPC members joining the MPC who do not seem to have a strong bias and may agree with RBI’s house view for some time,” wrote Rahul Bajoria, India & ASEAN economist, Bank of America.
While Bhattacharya had recently written an article for the Hindu Business Line newspaper making a case for a “calculated risk” in favour of early interest rate cuts, little is known about the views of the other two new members on monetary policy.
Tough to Second-Guess
“Mr. Bhattacharya was in favour of rate cuts back in mid-August, but the other MPC members have not commented much on monetary policy. We believe the new MPC members are more balanced and neutral, rather than hawkish. That said, the decision ultimately rests with the RBI governor (casting vote),” wrote Sonal Varma, chief economist and MD for India and Asia (ex-Japan) at Nomura.
In the MPC’s June and August policy statements, the voting pattern was 4-2 in favour of keeping the repo rate unchanged at 6.50%, with former external members Ashima Goyal and Jayanth Varma voting to reduce the repo rate by 25 basis points.
