Kamal Ghorui
MUMBAI: The minutes of the April meeting of the Monetary Policy Committee (MPC) reveal a panel that was deeply concerned about the downside risks to growth emanating from the West Asia conflict, even as it remained uniformly confident about the resilience of India’s macro fundamentals leading to the unanimous decision to hold rates.Governor Sanjay Malhotra set the tone by acknowledging the growing risks to the outlook, noting that “supply chain disruptions, that may take longer to subside fully and restore the logistics network, pose downside risks to growth and upside risks to inflation.”He further cautioned that “there are risks skewed to the downside from global and weather-related uncertainties” and warned that “if the conflict remains unresolved for a long duration, it can make the task of central banks arduous in their endeavour to rein in inflation expectations while minimising growth sacrifice.”Yet, even as he highlighted these vulnerabilities, he underscored the underlying strength of the economy, asserting that “the Indian economy is on a much stronger footing at the current juncture than at any time before to withstand these shocks,” while maintaining that the outlook “remains cautiously positive” with “underlying inflation pressures… contained.”
Deputy governor Poonam Gupta similarly flagged the emerging headwinds, observing that “growth is projected to be slightly milder at 6.9% for FY27” in a context where “global uncertainty has risen from already high levels” and the economy is dealing with an “external shock (that) is supply driven.” She anchored the outlook in domestic strength: inflation may edge up to 4.6% in FY27 but stay within the tolerance band.Growth rests on improving fundamentals of public/ private capex and rising investment rates which signal new-capacity build-out. Hence, to back a supportive stance, the RBI must stay growth-enabling, meet productive needs, keep the cycle turning.Among external members Saugata Bhattacharya struck a caution-first note: risk-balance shifts materially; conflict keeps supplychain dislocations elevated. Oil unlikely to revert to prewar levels fueling “non-linear” macro spillovers. Inflation risks build as expectations edge up; external flank wobbles, with capital flows geo-risk exposed. Yet he flagged a counterpoint: high-frequency data show resilience with the growth engine still running. Nagesh Kumar flagged a multi-channel shock: Hormuz blockage chokes supply, sends crude “through the roof,” stoking growth/inflation risks. Weak global demand hits exports; pricier oil swells import bill widening CAD.
