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Monetary policy committee must frontload action in view of deteriorating outlook: RBI governor Shaktikanta Das

Monetary policy committee must frontload action in view of deteriorating outlook: RBI governor Shaktikanta Das

The monetary policy committee (MPC) must frontload rate actions in view of the rapidly deteriorating economic outlook, Reserve Bank of India (RBI) governor Shaktikanta Das wrote in the minutes of the policy meeting held on May 20-22, explaining the reason behind advancing the meeting scheduled for June 3-5.
Das wrote that since the last off-cycle MPC meeting on March 27, macro-financial conditions had deteriorated rapidly. “The benign inflation outlook that is expected for the second half of 2020-21, coupled with the rising probability of a sharper loss of growth momentum in the near-term, has provided us with more policy space to ease financial conditions further and stimulate growth. Since the outbreak of Covid-19, the MPC has voted for front-loading its actions. In view of the deteriorating outlook, it is critical to reinforce these actions in sync with the space provided by the underlying conditions,” he said.

Deputy governor Michael Patra painted a far bleaker picture of the growth outlook and said that India’s growth was likely being set back on a more permanent basis. “In fact, my view is that the damage is so deep and extensive that India’s potential output has been pushed down, and it will take years to repair,” Patra said, adding, “In the deliberations of the MPC, my view is that the threats to growth have to be addressed frontally and aggressively, or risk a more dire outlook"

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