A recent press report said that the Reserve Bank of India went ahead with a large 50 basis point hike in its policy rate despite majority of its technical advisory committee pitching either for a pause or a nominal 25 basis points increase in the repo rate.
As per the report, most of the members are worried that the fiscal situation had placed the entire burden of inflation management on monetary policy. Further to tackle the strong inflationary pressure, RBI has in its first Quarter review of monetary policy upped the repo rate by 50 basis points from 7.5 per cent to 8 per cent.
However, if the RBI needed to give a signal to the market about its continuing anti-inflationary stance, it could raise repo rate by 25 basis points. Further, according to the committee inflation continued to be a major concern.
The report also said that in view of global uncertainty and declaration of the domestic economic activity most members of the committee suggested that equal weight be given to the objectives of fostering growth and controlling inflation while formulating monetary policy.
However as per the press report, the overall growth was still strong comparison with most other emerging market economies.
The hike in base rates has made home loan and other loan costlier to the borrowers.