{"id":3866,"date":"2016-05-17T23:34:23","date_gmt":"2016-05-17T18:04:23","guid":{"rendered":"https:\/\/www.indiaeconomyandbusiness.com\/is\/?p=3866"},"modified":"2022-10-28T20:57:41","modified_gmt":"2022-10-28T15:27:41","slug":"monetary-policy-committee","status":"publish","type":"post","link":"https:\/\/www.indiaeconomyandbusiness.com\/is\/monetary-policy-committee\/","title":{"rendered":"Monetary Policy Committee – What it entails.."},"content":{"rendered":"
The proposal to set up the Monetary Policy Committee (MPC), being discussed for quite some time and put forward as part of finance bill got cleared by the Parliament last week.<\/p>\n
This paves the way for formation of the committee, which is actually an evolution of Indian policy making process in line with global best practices. However, with the kind of politicisation that we end up witnessing, this too has been made out to have been done to “clip RBI governor’s wings”..!<\/p>\n
MPC will be a committee to look after the function of setting\u00a0policy interest rate which in turn, will be targeted towards keeping inflation at 4% +\/-t to 2% range. The committee will have three external members and three members from RBI, including the governor.\u00a0In case of a tie, the guv will have the final vote. As against the perception, the external members will not be nominated by the government but will be chosen by another committee\u00a0comprising of government officials, RBI guv and external experts.<\/p>\n
Contrary to general feeling that it limits RBI governor’s power, it will actually give more credibility to rate setting decisions and save him from the having to take the blame in case the rates are hiked to tame inflation. Under the current practice, even if the\u00a0Technical Advisory Committee (TAC) tasked with guiding him in rate setting decisions, favours rate hike, it is RBI guv who gets the blame for the same.\u00a0Having a committee with a clear mandate of meeting inflation goal actually would make life easier for him.<\/p>\n
The practice of having a committee called Federal Open Market Committee (FOMC), dates long back to 1933 in US. FOMC has 12 members, problem of plenty, i would say…! To that extent, having a six member committee brings balance without making it look unilateral.\u00a0Europe, UK also have similar structure for this overarching task of setting monetary policy direction.<\/p>\n
It may still take some time for the committee to finally be formed but this is certainly a good move and one towards collective responsibility. Well done everyone..!<\/p>\n","protected":false},"excerpt":{"rendered":"
The proposal to set up the Monetary Policy Committee (MPC), being discussed for quite some time and put forward as part of finance bill got cleared by the Parliament last week.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[855],"tags":[308,34,632],"class_list":["post-3866","post","type-post","status-publish","format-standard","hentry","category-banking-finance-2","tag-fomc","tag-rbi","tag-rbi-governor","membership-content","access-restricted"],"yoast_head":"\n