Today, October 9, the MPC decided unanimously to change the ‘withdrawal of accommodation’ stance to ‘neutral’ with focus on growth. While all were on the same boat on the need to change stance, it wasn’t the case for the decision to keep the repo rate unchanged at 6.5%.
Also Read: RBI Repo Rate: RBI keeps repo rate unchanged at 6.5%
Former MPC members Goyal and Varma were the voices of dissent in MPC’s stance to keep rates unchanged in recent monetary policy meetings as they advocated for rate cuts. The external MPC members Goyal and Varma had shown a more dovish stance compared to their RBI counterparts in recent rate meetings.
Ahead of the policy decision this time, economists had said the new faces (Ram Singh, Nagesh Kumar and Saugata Bhattacharya) in the six-member monetary policy committee didn’t have much time to call for rate cuts. They saw this reshuffle to alter the split within the panel in demand for rate cuts.
Considering the current and expected inflation and growth trends, which are balanced, Shaktikanta Das said the MPC decided to shift its stance. This shift allows the MPC more flexibility, while keeping a sharp focus on bringing inflation in line with the target, without losing sight of growth. However, Das he MPC must stay alert to changing inflation risks due to global geopolitical tensions, market volatility, unpredictable weather, and rising global food and metal prices. The committee thus decided to keep the repo rate unchanged at 6.50% during this meeting.However, Shakitkanta Das revealed that the decision to retain the repo rate wasn’t unanimous and it was decided based on a five-to-one majority. Thus, we have a new dissenter in team MPC.To be fair, some economists had predicted there could be one voice who may show dissent and ask for a rate cut.Several economists referenced a mid-August opinion piece by Bhattacharya, where he advocated for rate cuts, hinting he might be the dissenting voice. While Bhattacharya advocated in an article earlier for a “calculated risk” by implementing early interest rate cuts, the monetary policy views of the two other new members remained largely unknown.
Now, it is actually Nagesh Kumar who voted to reduce the policy repo rate by 25 basis points.
Who is Nagesh Kumar – the new dissenter
Nagesh Kumar, a respected economist, is currently the Director and Chief Executive of the Institute for Studies in Industrial Development (ISID). He has extensive experience in international economics and policy.
Dr. Kumar has served on the boards of various institutions, including the Export-Import Bank of India, the International Centre for Trade and Sustainable Development (ICTSD) in Geneva, and the South Asia Centre for Policy Studies (SACEPS) in Kathmandu. He has also been a part of several key committees and task forces set up by the Government of India. Notably, he was nominated by the Indian government to the Track-II Study Group on the Comprehensive Economic Partnership of East Asian Countries (CEPEA) and the Expert Group on the Economic Research Institute for ASEAN and East Asia (ERIA).
He has led important studies, including one for the SAARC Secretariat that paved the way for the South Asian Agreement on Trade in Services (SATIS) in 2010, and another on infrastructure development in East Asia.
Kumar has authored numerous works on topics like development cooperation, the impact of foreign direct investment (FDI), industrial policies, and regional economic cooperation in Asia. He holds a Ph.D. from the Delhi School of Economics and has received accolades like the Exim Bank’s International Trade Research Award.