Mumbai — The October Monetary Policy Committee minutes reveal a sharp internal fracture within the RBI, with Governor Sanjay Malhotra and his executive allies successfully pushing through a shift to 'calibrated tightening' over the objections of two external members. While the committee voted unanimously to hike the repo rate by 25 basis points to 5.5%, the real battle was over the stance. The 4-2 split vote confirmed that the central bank is no longer in a neutral position, effectively locking the door on near-term rate cuts.
External members Nagesh Kumar and Ram Singh argued that the current inflation spike is largely supply-driven, citing food and fuel costs, rather than demand overheating. Kumar, who supported the 25 bps hike, insisted the neutral stance remained appropriate given geopolitical and trade uncertainties. Singh went further, warning that adopting a 'calibrated tightening' label could signal an extended hiking cycle, potentially undermining the recent growth-supportive policies. They feared the RBI was reacting too aggressively to temporary supply shocks.
Malhotra, however, sided with Deputy Governor Poonam Gupta, Executive Director Indranil Bhattacharyya, and External Member Saugata Bhattacharya. The hawkish bloc argued that managing inflationary expectations is critical, even if the economy isn't overheating. Malhotra stated that under the new stance, any future policy action can only be a rate hike or a pause. The duration of this cycle will depend on whether price pressures spread beyond food and fuel, and the emergence of second-round effects.
This split marks a significant departure from the consensus often seen in MPC meetings. The external members’ dissent highlights the tension between protecting growth and containing inflation in a volatile global environment. With the stance now explicitly hawkish, market players must brace for a longer period of high borrowing costs. The next MPC meeting will likely see a pause, but the threat of further hikes remains a live possibility if inflation persists.