Mumbai: Monetary policy making will never be the same in the 81 year old India’s central bank as the government on Thursday completed the final step in the establishment of the Monetary Policy committee (MPC) based on a flexible inflation-targeting framework. Under the new monetary policy framework, interest rates will be set by the six-member MPC and not the governor. As per the new framework, every MPC member will have one vote, with the Reserve Bank governor having the casting vote in the event of a tie. Experts welcomed the move and said that the formation of such a committee does not undermine the autonomy of the RBI who would still be controlling the operational aspects of the policy such as daily liquidity management in addition to controlling the regulatory and supervisory aspects of the financial system.
Pronab Sen, former chairman of the National Statistical Commission told FC, “The autonomy of the RBI doesn’t change. If there is a disagreement it could be placed before the parliament. What MPC does is that it brings transparency into the decision making process.”
