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Informist, Friday, Jun. 20, 2025

 

--MPC Gupta: India econ growth can be higher based on favourable demography
--MPC Gupta: Core inflation would be lower excluding high, rising gold prices 
--MPC Gupta: Inflation expectations are on a moderating trend 
--MPC Gupta: CPI to undershoot 4% aim at margin; gives space to support growth 
--MPC Gupta: Monetary policy has need, room to provide support to economy 
--MPC Gupta: Monetary policy has room to help growth surpass past levels 
--MPC Gupta: There was a case for 2 consecutive rate cuts of 25 bps each 
--MPC Gupta on rate cuts: There is also merit in front-loading these cuts
--MPC Gupta: Frontloaded rate cut should help in fostering policy certainty 
--MPC Gupta: Frontloaded rate cut to transmit faster than staggered cuts
--MPC Gupta: Frontloaded rate cut to better counter global econ challenges 
--MPC Gupta: Further rate actions contingent on data, global uncertainties 

 

NEW DELHI – In her first public comments after taking charge as deputy governor at the Reserve Bank of India, Poonam Gupta said she voted to frontload rate cuts to improve transmission and counter risks from global economic uncertainty. She also felt a larger rate cut would provide more policy certainty, her comments in the Monetary Policy Committee's minutes of the June meeting showed.

 

Gupta joined the majority of the rate-setting panel members on Jun. 6 in cutting the policy repo rate by 50 basis points to 5.50% in a 5-1 vote, at a time when consensus forecast of economists was of a 25-bps cut. She wrote about the case of a staggered reduction in the repo rate by 25 bps each in June and the next policy, but said the case for frontloading the cuts had merit.

 

"This should help in fostering policy certainty and faster transmission than a staggered rate cut, and in more effectively countering the challenges emanating from the global economy," Gupta said in her minutes.

 

The panel also unanimously shifted the policy stance from "accommodative" to "neutral". Gupta took charge of the Monetary Policy Department of the RBI on May 2. Though she was present in the post-policy press conference, the deputy governor did not make any comments.

 

RBI Governor Sanjay Malhotra had also stressed on enhancing transmission of rate cut when he announced the MPC's decision. The panel has cut rates by 100 bps since February, and transmission has been helped by the central bank's steps to ensure a comfortable liquidity surplus in the banking system. However, Malhotra had said there was not yet a perceptible transmission in the credit market, which typically happens with a lag. Other members of the MPC also spoke about enhancing transmission of rate cuts in the minutes.

 

With headline inflation undershooting the RBI's medium-term target of 4% at the margin, and aligning with it durably, monetary policy had room to support growth, Gupta said. The RBI cut its projection for CPI inflation in 2025-26 (Apr-Mar) by 30 bps to 3.7% in June. Core inflation, which had climbed to around 4% in recent months, was contained and reflected the high and rising prices of gold, the deputy governor said. Food inflation had decelerated sharply in Jan-Apr, she said.

A revival in private consumption helped the economy in FY25, but private corporate capital expenditure was tentative and confined to only some pockets, Gupta said. She noted the GDP growth rate of 6.5% seen in FY25 and projected in FY26 was in line with the average growth of the last decade.

 

"Aforementioned developments indicate that there is both a need as well as the room for monetary policy to provide support to the economy in order for it to attain and even surpass the past rates of growth," she said in the minutes. Further monetary policy action should be contingent on incoming data and evolving global uncertainties, the deputy governor said, explaining her decision to support the stance change.

 

The RBI's newest deputy governor characterised the Indian economy as "remarkably" resilient over the past decade in the face of worsening trade dynamics, financial volatility, and geopolitical flare-ups. In addition to being the director general of the New Delhi-based think tank National Council of Applied Economic Research before her tenure began, Gupta was also a member of the Economic Advisory Council to the prime minister and convener of the Advisory Council to the 16th Finance Commission.

 

"Despite being one of the fastest growing large economies, its rate of economic growth, however, can be further accelerated based on the favourable demographics, conducive shift in regulatory policies, significant infrastructure enhancement, and leveraging on the macroeconomic stability achieved during the past decade," Gupta said in the minutes.  End

 

Reported by Aaryan Khanna

Edited by Ashish Shirke

 

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