Mains Paper 3: Indian Economy
The following things are important from UPSC perspective:
Prelims: MPC, UPSC has asked question on MPC in 2017 Preliminary examination.
Mains: Nothing much, just the trend of inflation needs to be kept in mind.
The Recent MPC Meeting
How to keep headline inflation close to 4% ?
The inflation outlook for the coming months
Mains Paper 3: Economy | Indian Economy Issues relating to planning
Once you are done reading this op-ed, you will be able to attempt the below mentioned question.
Explain the working of monetary policy committee? Why there is a pressure on the monetary policy committee to cut interest rates ?
From UPSC perspective, the following things are important:
Prelims level: Monetary policy committee, different types of inflation
Mains level: Monetary policy committee working
Bimonthly policy statement
Chances for Inflation?
The Monetary Policy Committee (MPC)
Ministry’s note for the Cabinet’s approval proposes a five-member Monetary Policy Committee.
Draft of Indian Financial Code, proposed a six-member monetary policy committee, besides powers for the government to appoint four of the six members.
The RBI a very credible institution, nothing will be done in MPC that undermines the role of the RBI
Rajan can certainly justify the swagger with which he spoke at the post-policy press conference
Rajan announced that RBI will gradually increase the foreign investment limit in central government bonds to 5% of the outstanding stock of government securities by March 2018.
Don’t the normal principles of political accountability – govt. is accountable to people and thus will take care of growth/ inflation/ interest rate decisions in the best interests of people, apply here?
Is it just a simple matter of separation of powers? Certain bodies must be independent from government control, though independence in no way should imply lack of accountability.
Will this bring the conflict of growth and inflation to the fore? The problem is that monetary policy tools will result in growth with immediate effects. However, any policy decisions regarding inflation takes a long time for it to take effect.
Let’s have a better, more informed debate around this. Shall we?
RBI has always been in news for two things – the legendary Raghuram Rajan and the (infinite) committees he summons. One such committee was the Urjit Patel Committee which had suggested some reforms which have snowballed into the modern day speculation of RBI’s autonomy loss. What’s the real deal?
FSLRC draft gives the centre the right to appoint 4 out of 7 monetary policy committee members, and takes away the veto power of RBI governor.
Remember the 2014 Urjit Patel Committee report?
RBI deputy governor Urjit Patel had recommended a 5-member MPC with the governor as the chairman. Overly tilted in favour of RBI, this report also suggested that the governor and, in his absence the deputy governor, will have a casting vote in case of a tie, but it was not in favour of the governor enjoying the veto power.
The FSLRC draft goes ahead and places more power in the hands of the govt.