Rising inflation on a near-term basis outweighed growth concerns for the Reserve Bank of India (RBI) and led the central bank to hold policy rates, while maintaining an accommodative stance, according to the minutes of the RBI's latest Monetary Policy Committee (MPC) meeting released on Thursday.
The minutes of the December MPC meeting policy showed that members were unanimous on inflation concerns amid slowing growth.
The MPC predicted rising inflation on a near-term basis, "but it is likely to moderate below target by Q2:2020-21".
On the other hand, the MPC reduced the country's FY20 GDP growth forecast from 6.1 per cent in the October policy to 5 per cent.
"Overall, several uncertainties cloud the growth-inflation outlook. First, the surge in food inflation in last three months, driven up by a spike in onion and other vegetable prices, could be transitory," RBI Governor Shaktikanta Das was quoted as saying in the minutes.
"It is likely to reverse gradually as late kharif output comes to the market. In view of this, even as the current food price spike driven by vegetables can be looked through, there is a need for greater clarity as to how the overall food inflation path is going to evolve, as there is some uncertainty about the outlook of prices of certain non-vegetable food items such as cereals , pulses, milk and sugar," he said.
"It is also not clear at this stage as to how the recent increase in telecom charges will play out even as CPI inflation excluding food and fuel has moderated," he added.
On December 5, the RBI held the repo, or its short-term lending rate for commercial banks unchanged at 5.15 per cent in its fifth review of the current fiscal.