50-bps cut a clear growth signal: MPC

Mumbai: India’s monetary policymakers used a benign inflation outlook to frontload rate cuts and send a ‘clear signal’ to productive sectors to boost growth, showed the minutes of the June 6 meeting that slashed benchmark rates by an outsized half a percentage point. A bigger reduction would also quicken transmission, argued those in favour.

“Given the sharp reduction in inflation over the past few months and the projected reduction in annual average inflation… it is expected that the front-loaded rate action along with certainty on the liquidity front would send a clear signal to the economic agents, thereby supporting consumption and investment through lower cost of borrowing,” central bank governor Sanjay Malhotra was cited as saying in the minutes of the Monetary Policy Committee (MPC) published Friday.

On June 6, the Reserve Bank of India (RBI) lowered the benchmark repo rate by an unexpected 50 basis points to 5.5% and changed the policy stance to “neutral” from “accommodative”, going by the majority vote of the MPC.

One basis point is a hundredth of a percentage point.