RBI-led MPC's new members to face risks to growth amid inflation fight

The Reserve Bank of India's (RBI) monetary policy committee (MPC) is set to see new external members appointed by the government this month. These members will face fresh challenges to economic growth, as highlighted by recent macroeconomic data.

RBI Governor Shaktikanta Das recently spoke at a Bretton Woods event in Singapore, pointing out external risks to growth. The MPC includes Deputy Governor Michael Patra and Executive Director Rajiv Ranjan, along with three government-appointed external members: Mumbai professor Ashima Goyal, New Delhi senior adviser Shashanka Bhide, and IIM-Ahmedabad professor Jayanth Varma. Their four-year terms are ending on October 4, ahead of the next MPC meeting on October 9.

Current data shows industrial production grew by 4.8%, and GDP for April-June stood at 6.7%. Das attributed the GDP dip to reduced government spending during elections.


Das emphasized the resilience of the global financial system but pointed out challenges in reducing inflation, especially in the services sector. "The last mile of disinflation has proved to be challenging," he said. High global debt levels and increased interest rates pose risks, potentially leading to financial instability. "The adverse spillovers from the 'higher for longer' interest rate scenario remain a contingent risk," Das added.

Geopolitical risks were another concern raised by Das. These risks, he said, can cause volatility in capital flows and asset prices, disrupting global economic integration. Such risks include wars, terrorist attacks, trade disputes, political gridlocks, and supply chain issues.

He also mentioned the rapid growth of non-banks and private credit, urging global regulators to monitor these developments closely and to implement necessary safeguards.

(With ToI inputs)