What has changed in RBI’s policy making

How History was Made

The Monetary policy was unveiled at 2:30 pm on Tuesday, a shift from the traditional 11 am announcement. That’s because the newly constituted Monetary Policy Committee ( MPC) had to meet and arrive at a decision first. Atmadip Ray takes a look at how things were and how they’ve changed.

BEFORE
Starting 2009, a technical advisory committee would advise the Reserve Bank of India Governor but he wasn’t obliged to adhere by its judgement. The policy’s authorship was solely that of the RBI Governor, thanks to his veto power. The August 9 policy was the last time things were done this way

NOW
Starting with the Tuesday announcement, the policy interest rate will be decided by the MPC, a key element in India’s move to an inflation-targeting policy that also democratises the process. The RBI has been tasked with keeping consumer inflation at 4% in the next five years with a margin of two percentage points on either side in the monetary policy framework agreed with the government

THE MPC: THE SIX-MEMBER
The six-member panel has three members nominated by the government and an equal number from the RBI. The government nominees are Chetan Ghate, professor, Indian Statistical Institute, Pami Dua, director, Delhi School of Economics and Ravindra Dholakia, professor, IIM-Ahmedabad. The RBI members are governor Urjit Patel, the deputy governor member in charge of monetary policy, currently R Gandhi, and executive director Michael Patra. Each member has one vote each, with the governor having a casting vote in the event of a tie. The MPC brainstormed for two days, similar to the process adopted by the US Federal Open Market Committee.

Here’s what happened in the hours before the policy became public: