Pragmatic pause

Regulatory intervention will improve the ease of doing business

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Theoretically, economic growth, surprising on the upside with benign inflation outcomes, is a desirable position for central banks. However, what makes life challenging for modern central bankers is the persistent uncertainty, owing to one cause or another.

Given the uncertain economic backdrop and recent policy interventions, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday rightly decided to leave the policy repo rate unchanged at 5.5 per cent. Some market participants were expecting a 25-basis-point cut. However, the MPC decided to wait for the impact of recent policy interventions to play out before deciding the next course of action. Policy transmission in the bond market, for instance, has been weak. Interestingly, the MPC in its statement has noted that the current macroeconomic conditions and outlook have opened up space for supporting growth.