New Delhi: RBI Governor Shaktikanta Das has said that “the economy needs a larger push” while highlighting several indicators of a slowdown as noted in the minutes of Monetary Policy Committee Meeting conducted between August 5 and 7.

During the bi-monthly policy meet, the Reserve Bank of India announced an unconventional 35 basis points (100bps = 1 percentage point) cut in the repo rate.  Speaking in favour of the aggressive cut in the repo rate, the RBI Governor noted that a reduction in the policy repo rate by conventional 25 bps will be inadequate.

Das said, “A policy rate adjustment of 25 bps or multiples thereof may not always be consistent with the evolving macroeconomic situation. Hence, at times it is apposite to calibrate the size of the conventional rate adjustment”.

Meanwhile, there has been a slowdown in the domestic demand and weakening of the global economy due to intensifying trade and geopolitical tensions, said RBI Governor Shaktikanta Das adding that the investment activity has been losing traction.

During a meeting by the Monetary Policy Committee (MPC), four members voted by a 4:2 margin to cut its repo rate by an unprecedented 35 bps to 5.4 per cent. Repo rate is the short-term lending rate by the RBI for commercial banks. MPC member Michael Debabrata Patra who voted for the 35 bps cut noted, “From here on, the space for monetary policy action has to be calibrated to the evolving situation, especially as the nature and depth of the slowdown are still unravelling and elbow room may be needed if it deepens”. Patra added, “A more broad-sided response involving all levers of policy acquires the highest priority now. The overarching goal is to reinvigorate domestic demand and the time to do it is now.”

Opposing the four MPC members who voted for a 35 bps cut, external MPC member Chetan Ghate said that there has been inadequate monetary transmission given the quantum of past rate cuts. Noting that the RBI could be burning through monetary policy space, Ghate said, “The WALR (weighted average lending rate) on fresh rupee loans in the banking system has come down by only 29 bps despite the MPC cutting rates by 75 bps in the February-June window. By a large cut (35 bps), I feel we will be burning through monetary policy space without much to show for it,” Ghate said, according to the minutes.