Monetary Policy Committee gets three academicians as members , to conduct first monetary policy review on 4th October. Government has appointed three members for monetary policy committee (MPC). Ravindra Dholakia, Pami Dua and Chetan Ghate has been appointed by the government for monetary policy committee. All members will have term of 4 years. There will be total 6 members in monetary policy committee, with the government and RBI appointing three persons each.
About Monetary Policy Committee :
Monetary Policy Committee (MPC) will replace the current system or framework where RBI Governor and his internal team have complete control over monetary policy. Now Reserve Bank of India (RBI) has relinquished this power the monetary policy committee, moving to a model followed in developed world.
There will be six members in MPC – three member each appointed by RBI and Government.
RBI appointed committee led by Patel in Feb 2014 recommended the idea of monetary policy committee. Five member committee was suggested of which three member would be from RBI and two external members would be appointed by RBI governor and deputy governor. It was also suggested that governor would have a casting vote in case of a tie.
The committee will conduct its first monetary policy review on 4th October with Urjit Patel’s first as RBI governor.
Same framework is followed in developed nations. Bank of England’s MPC has nine members including governor, three deputy governors and chief economist of the central bank. The remaining four members are appointed by UK’s Chancellor of the exchequer.
The US Federal Reserve sets its benchmark rate—the Fed funds rate—through the Federal Open Market Committee (FOMC) having seven board members, appointed by the US President and confirmed by the US Senate. The governor of the Federal Reserve is appointed for 14-year terms for the sake of continuity. The chairperson and the vice-chairperson are appointed for four years each. In addition, there are five members—regional reserve bank heads—who serve on FOMC by rotation.
The US and the UK, too, have similar panels in place, with representation from both the central bank and the government.
The preamble in the RBI Act, as amended by the Finance Act, 2016, now provides that the primary objective of India’s monetary policy is to “maintain price stability, while keeping in mind the objective of growth”.
About Government appointed nominees :
Ravindra Dholakia – He is a faculty of Economics at IIM- Ahmedabad since 1985. He has rich experience in policy making in both state and central governments.
Pami Dua – He is director at Delhi School of Economics and one of the most respected macroeconomics professors in India
Chetan Ghate – He is associate professor of Planning Unit at India Statistical Institute Delhi.