The policy decisions taken by the Reserve Bank of India (RBI) in the recently concluded Monetary Policy Committee (MPC) meeting are quite unambiguous and, in a way, appear to define what the monetary policy approach of the central bank may look like during the current financial year. The MPC kept the repo rate unchanged at 6.5 per cent, standing deposit facility (SDF) rate at 6.25 per cent, and marginal standing facility (MSF) rate at 6.75 per cent. Furthermore, the committee decided to continue with the ‘withdrawal of accommodation’ stance. The objective behind the continuation of the pause has been made explicitly clear. The RBI Governor Shaktikanta Das minced no words in saying that “the best contribution of monetary policy to the economy’s ability to realise its potential is by ensuring price stability”. This has left no doubt that inflation remains the predominant parameter on which the near future actions of the RBI will be based. This, in fact, is in sync with what other major central banks across the world are doing presently. The reasons for which the recent monetary policy decisions can be said to have a defining impact on the subsequent meetings are multi-fold. In the first place, rate cuts have been avoided even as the inflation eased to 4.7 per cent in April — the first month of the ongoing financial year. The RBI governor asserted that despite the headline inflation easing down, there is no room for complacency. The MPC has explicitly expressed its resolve to stick to the target of 4 per cent inflation to ensure ‘sustainable growth’. Notably, the 4 per cent inflation target presents an ideal scenario; the RBI, throughout the last fiscal, had aimed at keeping inflation within the permissible range of 2 to 6 per cent. Currently, the achievement of the ideal 4 per cent target doesn’t appear to be in sight, at least in the ongoing financial year. As per RBI’s own projections, inflation may stand at 4.6 per cent in the first quarter, 5.2 per cent in the second quarter, and 5.4 per cent in the third and fourth quarters — averaging 5.1 per cent all throughout. Going by this, it is difficult to imagine the RBI opting for a rate cut in the present fiscal. On the record, the MPC has said that the future action will depend on the evolving situation. To be more specific, the future course of action of the RBI will depend on a range of factors including the El Niño effect, persisting geopolitical crises and adverse fluctuations in commodity prices globally. These factors don’t seem to be dying down anytime soon, all at once. In wake of these evolving situations, and in sync with RBI’s unrelenting focus on price stability, it can be said that the central bank has its own set of rationale behind continuing the pause. Its decision is also backed by a conviction/presumption that the macroeconomic foundations of the Indian economy are on a stable footing. However, what the RBI tends to ignore outrightly is the impact on investment and private consumption — two of the main drivers of growth. Notably, the growth in private consumption expenditure in the fourth quarter of FY23 stood merely at 2.8 per cent. The RBI has retained the growth projection for FY 2023-24 at 6.5 per cent, but the experts believe that this growth curve can be K-shaped, meaning that not all sections of society will enjoy the benefits of growth. This clearly indicates that the private consumption expenditure from the lower strata of the economic class — comprising a larger chunk — will remain low. This can have adverse and long-lasting impact on the Indian economy. The RBI Governor has categorically denied the influence of the actions of the US Fed and other central banks, saying that “our monetary policy actions are determined primarily by domestic conditions”. But it goes without saying that the actions of other central banks indirectly affect domestic conditions. Whatever be the case, as long as the RBI decides to abstain from rate cuts, proper safeguards must be put in place to ensure that private consumption and investment, along with other engines of growth, don’t suffer.