The Reserve Bank of India (RBI) Governor Shaktikanta Das said that the Indian economy has clearly been losing traction and needs a decisive monetary policy to promote growth.
The Governor said while voting for a 25 basis points (bps) rate cut along with other five members at the MPC meeting earlier this month.
“Since the last meeting of the rate-setting panel in April 2019, greater clarity has emerged about the evolving macroeconomic situation,” Das, as per the minutes of the June 3-6 Monetary Policy Committee, said that.
The RBI on Thursday released the minutes of the meeting.
Overall, there is clear evidence of economic activity “losing traction” with the GDP growth in the fourth quarter of the last financial year slowing to 5.8 per cent, he said.
“In sum, growth impulses have clearly weakened, while the headline inflation the trajectory is projected to remain below 4.0 percent throughout 2019-20 even after considering the expected transmission of the past two policy rate cuts.
Keeping in view the evolving growth-inflation dynamics, there is a need for decisive monetary policy action. Hence, my vote is to reduce the policy repo rate by 25 basis points,” he said.
Indicating that more measures could be taken in the near future to boost growth, he favored shifting the stance of monetary policy from neutral to accommodative in order to send a clear signal.
For the third time in a row RBI has cut the key lending rate (repo) by 25 bps.