Government appoints 3 members of MPC panel

The government has appointed 3 members of the Monetary Policy Committee (MPC) for four years. The MPC for the first time will take a call on the policy rate at the October 4 monetary review. The government appointed members are, Indian Statistical Institute's (ISI's) Chetan Ghate, Director of Delhi School of Economics Pami Dua and Indian Institute of Management (Ahmedabad) professor Ravindra H Dholakia. The three outside experts will join Reserve Bank of India (RBI) Governor Urjit Patel and two senior officials from the bank’s monetary policy department.

The Appointments Committee of the Cabinet cleared the three eminent experts as members on the MPC for a period of four years or until further orders, whichever is earlier. Among the three outsider experts Ghate was part of a five-member technical advisory committee that provided non-binding advice on interest rates to the RBI governor ahead of each policy review. The committee will be responsible for ensuring consumer inflation stays within a range of 2 to 6 percent, a target that was previously announced by the government. The members of the committee from RBI are governor Patel, deputy governor R. Gandhi, who is also in charge of the monetary policy, and executive director Michael Patra. Patel, who took over the helm at the RBI earlier this month, will have the casting vote in the six-member MPC in the event of a tie.

The MPC framework replaces the current system where the RBI governor and his internal team have complete control over monetary policy. While a committee advises RBI on monetary policy decisions, the central bank is under no obligation to accept its recommendations. The MPC will strive to ensure that the inflation target decided by the government and the central bank is met. RBI is now required to publish a monetary policy report every six months explaining the sources of inflation and the forecasts of inflation for the period between six to 18 months.