Q-3)
What role does the Monetary Policy Committee (MPC) play in setting monetary policy in India?
The Monetary Policy Committee (MPC) plays a crucial role in setting monetary policy in India. The MPC was established in 2016 under the Reserve Bank of India Act, 1934, and is responsible for determining the policy interest rate and the stance of monetary policy. The committee comprises six members, with three members appointed by the central government and three members appointed by the Reserve Bank of India.
The present members of the MPC are:
- Shri Shaktikanta Das, Governor, Reserve Bank of India (Chairperson of the committee)
- Michael Debabrata Patra, Deputy Governor, Reserve Bank of India (Member)
- Executive director of the Bank in charge of monetary policy – Rajiv Ranjan
- Ashima Goyal, Professor, Indira Gandhi Institute of Development Research (Member)
- Jayanth R. Varma, Professor, Indian Institute of Management, Ahmedabad (Member)
- Shri Shashanka Bhide, Senior Advisor, National Council of Applied Economic Research (NCAER) (Member)
The MPC meets at least four times a year to review the state of the economy and make decisions on monetary policy based on factors such as inflation, growth, and global economic developments. The decisions of the MPC are announced in a Monetary Policy Statement, which outlines the policy stance, the policy interest rate, and the rationale for the decision.