Highlights from the minutes of the RBI meeting

Here are the few highlights from RBI’s statement today. Overall, the concerns are around - higher oil price, HRA and impact of GST

  • Dr. Chetan Ghate

    As the Phillips Curve for the economy shifts up because of increases in crude prices, this poses an upside risk to the medium term inflation target of 4 per cent.

    The conquest of Indian inflation is certainly not a done deal!

  • Dr. Pami Dua

    The impact of House Rent Allowance and likely fiscal slippages may also continue to push inflation up.

    The Reserve Bank’s Industrial Outlook Survey shows that firms expect to pass on the increase in input prices to output prices.

    In the coming months, downside risks to growth may arise from lower than projected sowing in the rabi season. Another major factor may be the recent increase in oil prices that will put pressure on margins of firms.

  • Dr. Ravindra H. Dholakia (who is the only one vote for 25 basis points rate cut)

    Fiscal space is more or less exhausted but the space for the monetary boost has fortunately been available now for a relatively long period.

    A very consistent and more reliable result is obtained from the Indian Institute of Management Ahmedabad (IIMA) latest business expectation survey with more than 2100 responses that shows the headline CPI inflation expectation one year ahead to be 3.71 per cent

    Better performing and financially sound companies according to the RBI surveys are investing more in financial assets than in physical assets. They behave more like savers than investors because the real rate of interest is too high to encourage long term investment.

  • Dr. Michael Debabrata Patra

    …price pressures are no more confined to vegetables alone, as in previous readings; they are getting diffused across petroleum products, services (excluding housing, which is being pulled up independently by statistical effects of the house rent allowance for central government employees), and into underlying inflation.

    The current phase of accommodation in the monetary policy stance – reduction of the policy rate by 200 basis points - is one of the deepest barring the easing associated with the global financial crisis.

    As growth regains solid ground, it could likely sustain inflation above the target.

  • Dr. Viral V. Acharya

    Oil price evolution remains a particular concern. The shale gas response notwithstanding, improving global demand appears to be playing an important role in shaping oil prices along with the extension of OPEC’s production cuts.

    As public sector banks raise capital, receive recapitalisation from the government, and undertake reforms, credit flows to productive sectors of the economy should improve.

    Incoming data will be key to shape the policy going forward. I remain keen to (i) understand the impact of Goods and Services Tax (GST) on price levels as its rollout stabilises; (ii) assess in coming months the robustness of growth revival in GVA manufacturing; and (iii) track the impact of commodity prices on the Indian economy and markets.

  • Dr. Urjit R. Patel

    Inflation is now projected to be marginally higher, going forward, as the recent increase in oil prices is likely to sustain. Food inflation, led by vegetables, remains highly variable, while deflation in pulses continues. The impact of higher house rent allowance (HRA) of central government employees on housing inflation will peak in December.

    fiscal slippage concerns linger on

    ..the recent upturn in crude oil prices has emerged as a source of concern. Several uncertainties, especially on the fiscal and external fronts, persist. It is, therefore, important to be vigilant.