The MPC minutes announced by the RBI on 20th February showed consensus among the 6 members about the need to go slow on rate cuts. MPC has shown a clear preference for inflation control over boosting GDP growth.
Inflation is the worry
All the six members of the MPC were almost unanimous that sharply higher inflation was the real problem for the Indian economy. At 7.59% in Jan-20, CPI inflation leaves little room for any further rate cuts. Household inflation expectations are also tilting towards the higher side. Food inflation has always been sticky and the virus scare in China could only make oil prices more volatile. Inflation is already 150 basis points off the upper range allowed by the RBI and the MPC looks unlikely to cut rates till the time inflation moves below 4%.