Monetary Policy Statement : June 6, 2018

June 7, 2018
Monetary Policy objectives
Your editorial “Along expected lines” read with the three articles by Usha Thorat, Shanti Ekambaram and Himadri Bhattacharya (Business Line, June 7) educate the common man about the purport of the RBI’s second bimonthly monetary policy statement issued after a three day sitting of Monetary Policy Committee (MPC).
By tradition, RBI’s monetary policy documents have the look of research documents (no denying that they are backed by a great amount of research work) and beyond base rate changes and their impact on prices including bank interest rates, discussions in the media do not go much further. This time around, the welcome change is, RBI chose to explain what MPC meant by saying ‘the hike in base rate was consistent with neutral stance’. As mentioned by Usha Thorat, the lay and the cognoscenti will debate this statement in the coming days.

 As the ‘Statement on Developmental and Regulatory Policies’ which claims to set out various developmental and regulatory policy measures for strengthening regulation and supervision; broadening and deepening financial markets; improving currency and debt management; fostering innovation in payment and settlement system; and, facilitating data management is issued independent of the monetary policy statement (for which technically MPC is responsible) one feels that important policy initiatives like expansion of the payment system, opportunity for urban banks to become small finance banks, relief provided for certain categories of MSMEs and to banks in regard to avail certain reliefs while managing bond portfolio did not get adequate media coverage.
Though RBI may hold on to the position that its mandated priority will continue to be ensuring inflation remains within the accepted band, the need for harmonizing monetary policy and fiscal policies will continue to be a challenge for GOI and RBI. Here, while several initiatives to professionalize the functioning are evident in RBI, finance ministry continues to be guided by tradition.

M G Warrier, Thiruvananthapuram


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