Monetary Policy Committee sees food inflation softening, minutes show

Monetary Policy Committee sees food inflation softening, minutes show: The six-member monetary policy committee (MPC), which met for the first time earlier this month, justified its vote to cut the Reserve Bank of India’s policy rate citing a ‘real’ slowing in retail inflation...

October 20, 2016
Monetary Policy Committee
This refers to the report “MPC sees food inflation softening, minutes show” (The Hindu, October 19). Monetary Policy Committee was conceived by Financial Sector Legislative Reforms Commission(FSLRC) as one of the many reforms that would finally help Finance Ministry make RBI amenable. Though its brief was to recommend on financial sector legislative reforms, FSLRC concentrated on truncating and weakening Reserve Bank of India. It invented reasons even to change the designation of the head of RBI. But, RBI is a lucky institution. Many things changed by the time the recommendations of FSLRC were being taken up for implementation. They just became reference points for further action on subjects covered in the report. The two events, the presence of Dr Raghuram Rajan at Mint Road from 2013 to 2016 and the change of guard in New Delhi worked in RBI’s favour.
Thus the Monetary Policy Committee got a makeover as an expert body unburdening the RBI Governor from the individual responsibility to explain every policy decision. Since the time the constitution of MPC was announced, a section of analysts has been apprehensive of MPC dividing itself into Team A(RBI) and Team B (GOI) and voting for constituency interests, making casting vote by Governor essential to take decisions. The professional way in which MPC has conducted itself in its debut meeting as evidenced by the views of  each member on the policy stance, now in public domain, has proved these doomsayers wrong. As it gains more experience and a feel of RBI’s role, MPC will graduate into another strong pillar supporting the central bank.

M G Warrier, Mumbai


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