Key Points
One could argue equally for a pause, particularly since growth is expected to slow down, as we have seen from the World Bank estimate of growth for India in this fiscal..
Unlike in the past, where it was basically a trade-off between growth and inflation, this time around, the MPC has to contend with a third element of financial stability because after what we have seen in the US, the consequence of sharp rise in interest rates and what it means for banks' portfolio, this is something the MPC cannot completely ignore...
The broad market view seems to be that since inflation is still very high in India, the RBI and the MPC is likely to have a 25 bps hike in interest rates, in repo rates..
But what we saw from the last monetary policy meeting is that two of the three external members are already arguing in favour of a pause and so it is going to be a tough call..
There is a case for a pause, particularly since the RBI's limit on remit rather, on monetary policy and inflation control is confined to essentially the core inflation...
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