INSUBCONTINENT EXCLUSIVE:
The RBI's MPC members flagged several concerns, including an increase in MSP
The Reserve Bank of India (RBI) could take a more hawkish tone starting as early
as June despite easing inflation, minutes of the monetary policy committee's (MPC) meeting that took place this month showed
The RBI's MPC members flagged several concerns, including an increase in minimum support prices for farmers and high and volatile crude oil
prices, the minutes released on Thursday showed.Viral Acharya, a deputy governor at the central bank and a member of the panel, said he
would "decisively" vote for a beginning of "withdrawal of accommodation" in the next monetary policy meeting in June, adding that it was
also important to see some data on growth."Reinforcement of inflation-targeting credibility that such a shift would signal is crucial in my
view for prudent macroeconomic management, on both the domestic and external sector fronts," Acharya said.The RBI this month kept its policy
repo rate unchanged at 6 percent for the fourth straight meeting and retained its "neutral" stance.While five MPC members had voted in
favour of the decision, one - Michael Patra - recommended a quarter percentage point hike in the repo rate.Echoing Acharya, Patra said that
despite ebbing inflation in the past few months, an easier or neutral monetary policy stance would delay achieving the inflation
target."Underlying macroeconomic developments impart some urgency to commencing the withdrawal of accommodation," Patra said.The central
bank's medium-term inflation target has been set at 4 percent."The minutes of the MPC's meeting have a distinctly hawkish tinge as compared
to our reading of the statement itself," said Aditi Nayar, the principal economist of rating agency ICRA."While incoming data and policy
decisions related to factors such as MSPs, excise on fuels and expenditure announcements remain critical, today's minutes suggest that a
back-ended rate hike in 2018 remains a possibility, if headline inflation exceeds the trajectory set out by the MPC."As a result, bond
yields are likely to harden in the immediate term."Data released after the monetary policy meeting showed retail inflation rate eased to
4.28 percent in March - a number that has been moderating since it hit a 17-month high of 5.2 percent in December.During the policy meeting,
the central bank lowered its April-September inflation projection to 4.7-5.1 percent, from a previous range of 5.1-5.6 percent that it
released in February.For the second half of this fiscal year, the MPC said it saw inflation at 4.4 percent, but that was without taking into
