The MPC’s ‘If it ain’t broke, don’t fix it’ rate decision has its merits

With growth doing better than all expectations, exceeding Governor Shaktikanta Dass prophesy of a surprise on the upside," and inflation seemingly under control for now, the MPCs decision last Friday to maintain the status quo was not surprising..

Sure, some might cavil at RBIs Panglossian view of the India growth story, the conviction that we can remain an oasis of growth and resilience at a time when, by Governor Dass own admission, normality still eludes the global economy." But the numbers, both on the growth front (7% in 2023-24) and inflation front (5.4% for the year), look reasonable enough..

In all fairness, though, the credit for doing what appears to be a fine balancing act must be evenly divided: between the governments supply-side measures and RBIs demand-compression moves, whether through interest rate action (inaction?) or prudential measures like raising risk weights on unsecured retail loans..

But if the MPC was worried about over-heating and attendant asset-price inflation, of which there are unmistakable signs, given how prices have shot up across asset classesstocks, gold, real estatethe governor gave no inkling of that..

If Governor Dass statement was unremarkable in terms of the measures that markets normally look atrate action, hawkish commentary and so onwhat was notable was that for the first time in recent months, a major part of the statement was devoted to liquidity and prudential measures..

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