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A consensus appears to be emerging among the external members of the Reserve Bank of India’s monetary policy committee that high interest rates are damaging to economic growth, a sign that the debate over the timing of any easing is intensifying. Jayanth Rama Varma and Ashima Goyal voted at the June meeting for a rate cut, arguing that too restrictive policy will hurt growth, recent minutes showed. Shashanka Bhide, the third external official on the six-member committee, voted against easing, but in an emailed response to questions, he acknowledged that inflation-adjusted rates above 1.5% “is not supportive of higher growth.” India’s real, or inflation-adjusted, rate is currently at 1.75%.Bhide still advocated for caution, though, saying rapid economic growth and inflation can be “sub-optimal.” The rest of the monetary policy committee is made up of RBI officials, who have stuck to their relatively hawkish stance on inflation, including Governor Shaktikanta Das. Any “hasty action” will do more harm than good, Das argued at the last MPC meeting, according to the minutes.The split in the views show a widening gap between the external and internal members on how to balance economic growth and inflation. The committee has kept the benchmark repurchase rate unchanged at 6.5% for more than a year now, with inflation still hovering above the RBI’s 4% target.Madhavi Arora, lead economist at Emkay Global Financial Services Ltd., said it’s unclear if the differences in views means any rate action will follow in coming months. She predicted the RBI likely won’t ease until after the Federal Reserve does so.“We maintain that rate cuts will be a calendar year 2025 tale but liquidity management will be the near-term story, implying that a mild stealth easing is still on the anvil,” she wrote in a note. Economists surveyed by Bloomberg predict the RBI will lower rates in the final quarter of 2024. The next rate decision is on Aug. 8.External MPC member Varma said as inflation moves closer to the target, monetary policy should be “only mildly restrictive, so that the growth sacrifice is modest.”Bhide refuted the notion that too-high borrowing costs have choked off growth, saying rapid expansion of more than 7% in recent years has been driven by domestic demand. To sustain that pace, “we need supportive external demand conditions” going forward, he said.Varma argued that India needs faster growth rates than what’s projected over the next two years, given its “current stage of the demographic transition.”Both MPC members will leave the committee in October, once its term ends. Here’s more of what they said in emailed responses to questions:“It is important to recognize that we now have a lower inflation rate and we need to sustain this lower inflation rate close to the target,” Bhide said“A well distributed normal monsoon would be supportive of rural growth,” Bhide said Both the members denied that the MPC is waiting for the US Federal Reserve to cut rates first. “I believe that there are honest differences of opinion here,” Varma said“I would not like to speculate on how other members of the MPC might act in future meetings. I am happy that at this meeting, we had another voice emphasizing the growth concerns that are there today,” Varma said

Real-time dollar settlement in India’s newest financial hub in Gujarat is likely to become operational later this year or by early 2025, according to a senior official, a step that could burnish the country’s appeal to foreign investors. The service which will cut down on times and delays, and it would be available for financial firms in Gujarat International Finance Tec-City, Prime Minister Narendra Modi’s flagship project. It would speed up transactions at a time when foreigners are showing greater interest in India and its sovereign bonds are due to be included into JPMorgan Chase & Co’s emerging market index. “If your cash movement become faster and more efficient, then it will have a positive ripple effect upon the rest of the market,” K Rajaraman, chairman of International Financial Services Authority, told Bloomberg News in an interview. The IFSCA regulates the hub, also known as GIFT City, and which offers stocks, currency and derivatives trading. Rajaraman added that the real time settlement system will promote greater efficiency.India imposes capital controls and has a myraid tax structure, both of which have been eased for this financial hub so that it can emerge as an alternative trading center to Singapore and Dubai. Last year, the Reserve Bank of India started a domestic non-deliverable forward market settled in dollars at GIFT City. Some foreign banks are already offering derivative products to investors who want exposure to India without necessarily having to set up shop. Globally, there are efforts underway to make sending money across borders faster and less complicated. Currently, most cross-border transactions rely on a network of correspondent banks, which can make settlement expensive and lead to delays. One such example is the Bank for International Settlements’s mBridge project, which uses blockchain technology for instant settlement.

Equity benchmarks closed higher on Monday recovering from early lows even amid a bearish trend in global equity markets. The 30-share Sensex ended 131 points higher at 77,341 and the Nifty rose 36 points to settle at 23,537.Stocks that were in focus include names like Raymond, which rose 3.6%, JK Paper, which gained 4.3%, and MapmyIndia, whose shares declined 4.84% on Monday.Here's what Avdhut Bagkar, Derivatives and Technical Analyst at StoxBox, recommends investors should do with these stocks when the market resumes trading today.RaymondShares of Raymond need a strong closing above 2700 to enter the next leg of upside. Until then, the support of 2400 should be kept on a closing basis. While the trend remains positive, only a resilient close over the hurdle may prompt next moveJK PaperThe stock has risen over 60 percent so far this year and continues to attract bulls. The “Golden Cross” has triggered fresh moves that may see 600 and 650 in the medium-term. The immediate support exists at 500.MapmyIndiaThe stock must close over 2600 level to embark on the next up move. When that happens, a move towards 3000 can not be neglected. On the downside 2200 remains a key support. The recent sharp surge envisions short-term bullishness in the stock.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)