Four members of the Technical Advisory Committee on Monetary Policy set up by the Reserve Bank of India (RBI) were not in favour of the central bank cutting repo rate in the May 3 Annual Policy meeting.
On May 3, the central bank reduced the repo rate (the interest rate at which banks borrow short-term funds from the central bank) from 7.50 per cent to 7.25 per cent in order to support recovery in the economy.
These members of the committee suggested that the RBI wait for at least one quarter to gauge the evolving macroeconomic situation, minutes of the meeting of the panel released by the RBI shows. These four members are part of the seven external members of the committee.
The four members observed that reducing the repo rate may not help revive growth, since low growth reflects impediments to investment projects through power, fuel, supply linkages.
Given the range of factors underlying the slowdown in growth and investment, investment at this stage may not be sensitive to interest rate changes, the members opined.
Moreover, even though the repo rate has been reduced by 100 basis points in 2012-13, lending rates have not gone down commensurately to activate investment,” according to the minutes.