INSUBCONTINENT EXCLUSIVE:
has become the highest priority while a benign inflation outlook has given the central bank room to cut rates although transmission remains
inadequate, monetary policy committee meeting minutes showed.The Reserve Bank of India (RBI) lowered its benchmark interest rates for a
fourth straight meeting this month with a slightly bigger than expected cut, underscoring its worries about the near-five year low economic
growth pace.The six-member monetary policy committee (MPC) cut the repo rate by an unconventional 35 basis points (bps) to 5.40 per
cent."Given the current and evolving inflation and growth scenario at this juncture, it can no longer be a business as usual approach
The economy needs a larger push," Governor Shaktikanta Das said in the minutes, released on Wednesday.Annual retail inflation in July was
3.15 per cent, down from an eight-month high of 3.18 per cent in June and staying below the central bank's 4 per cent medium-term target
for a 12th straight month, raising expectations for a cut in October.Last week, a Reuters poll predicted the RBI would ease its benchmark
rate by 25 basis points again to 5.15 per cent at its October meeting, followed by a 15 basis point cut in the first quarter of 2020.Since
February, the RBI has cut the repo rate by a total 110 basis points (bps), but most Indian banks have not come close to following
suit."Under prevailing circumstances, the immediate transmission should be considered not so much in terms of the bank deposit and lending
rates but more specific rates influencing new investments such as housing loans, vehicle loans and long term bonds," said one MPC member,
Ravindra Dholakia.Most members of the committee, however, felt rate transmission would be faster in coming weeks and months aided by surplus
liquidity in the banking system.The RBI is also looking to get banks to link some new loans to its key policy rate or other external
benchmarks, Mr Das said on Monday, as he pushes them to cut rates faster to stimulate growth."While they are giving stylised arguments to
justify their recommendations, none of them has made a clear statement on the outlook or possible timelines for recovery," said Rupa Rege
Nitsure, chief economist at L-T Financial Holdings."A lot depends on how promptly fiscal authorities undertake remedial measures."Finance
Minister Nirmala Sitharaman has recently held several meetings with industry leaders, who have called for stimulus measures, including tax
rebates, to support consumer demand and private investment.Pami Dua, another member of the MPC, said while monetary policy can impact
cyclical factors, it has its limits when the slowdown is structural in nature."Therefore, investment-focused fiscal policy and active
continuation of structural reforms are imperative at this juncture," Ms Dua said.The government was looking into policy issues such as
exempting foreign portfolio investor trusts from recently imposed high tax, deferring a proposal to raise minimum public share holding in
listed companies to 35 per cent from 25 per cent and easing of banking credit, a source told Reuters on Friday."Given the evolving
growth-inflation risk picture, monetary policy should be used judiciously," member Chetan Ghate said.Get Breaking news, live coverage, and
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