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The Reserve Bank of India's Governor Duvvuri Subarao cut the key interest rate by an unexpectedly sharp 50 basis point in April, though a majority of the external members of an advisory committee suggested rates be held steady, minutes released by the central bank showed on Monday.
The committee consists of seven external members, apart from the governor and the four deputy governors. The governor has the final say in deciding the rates.
The RBI cut its repo rate on April 17 by more than what was expected by economists, to boost India's sagging economy.
Four of the six external members of the RBI's technical advisory committee (TAC) who attended the meeting on April 11 had suggested no change in the repo rate.
"They felt that unless supply side constraints were addressed and relevant measures were taken to revive investment activity, the reduction in policy rate would not have any impact," the minutes said.
Of these four members, one suggested that the cash reserve ratio (CRR), or the percentage of deposits lenders have to maintain with the central bank, be reduced by 50 basis points, while another said the CRR was already at a low level and should be used sparingly.
The remaining two of these four members did not suggest any change in the CRR.
The other two of the six members who attended the meeting suggested that the policy rate be reduced by 25 basis points.
Of those, one also suggested a reduction in the CRR by 50 basis points. One external member could not attend the meeting.
Subbarao has acted against the view of the majority of his advisers for the fifth time, according to records available since the RBI started releasing the minutes.
The minutes said most members indicated that the slowdown in the economy and investment activity in India had more to do with supply side constraints, administrative delays and infrastructural bottlenecks, rather than monetary tightening.
The members noted the significant moderation in both headline and non-food manufactured products inflation, but were concerned about upside risks from global commodity prices, high fiscal deficit and sharp increase in real rural wages.
The 12-member panel, which meets before every quarterly monetary policy review, is advisory in nature and has no voting powers.
The central bank started releasing the minutes of its quarterly technical advisory committee meeting from February 2011.