India navigates challenges with rate cut debate

India’s quest for economic growth has hit a roadblock within its own monetary policy committee (MPC), with an ambitious growth target of 7.6 per cent for the current financial year, Reuters reported on Monday.

Some MPC members believe rate cuts are necessary to stimulate the economy, create jobs, and achieve the nation’s growth target.

Ashima Goyal, an external member, argues that keeping inflation within the target range allows for higher growth rates.

However, Governor Das and others caution against complacency. They highlight the vulnerability of inflation to external factors like supply chain disruptions. Lowering rates too soon could reignite inflationary pressures.

While acknowledging the benefits of lower rates, Goyal expresses concern about a rapid surge in private borrowing, potentially leading to a debt crisis similar to the 2000s.

The MPC’s internal debate reflects the complexities of managing inflation and growth simultaneously.  The timing and extent of future interest rate adjustments will depend on how this delicate balancing act plays out in the coming months.