Govt announces 3 new external members ahead of key RBI MPC meet

The central government on Tuesday appointed Ram Singh, Saugata Bhattacharya and Nagesh Kumar as the new external members to the Reserve Bank of India’s (RBI) monetary policy committee.

The appointments will replace Mumbai professor Ashima Goyal, IIM-Ahmedabad professor Jayanth Varma, and New Delhi senior adviser Shashanka Bhide, whose 4-year contracts will expire on October 4, just days before the MPC is expected to meet and make its rate decision on October 9.

Ram Singh is the Director of Delhi School of Economics, University of Delhi, while Dr. Nagesh Kumar is the Director and Chief Executive, Institute for Studies in Industrial Development in New Delhi.


Meanwhile, Saugata Bhattacharya is a noted economist.

As per the Finance Ministry, the new members of the MPC shall hold office for a period of four years, effective immediately.

The decision comes against the backdrop of a shift in global central bank policy and the new members will face pressure to cut interest rates.

The U.S. Federal Reserve in September, for the first time since 2020, reduced its key interest rate by 50 basis points, prompting central banks elsewhere to take action to ward off market turmoil.

How MPC members affect policy decisions

Change in the leadership of the RBI can bring sweeping monetary policy shifts. Urjit Patel, who was RBI governor before Das took over in December 2018, was a policy hawk, rejecting calls to cut interest rates even when inflation tumbled to a record low of 1.46% in June 2017. In Das’s first MPC meeting in February 2019, he promptly cut rates in a surprise move.

Das is now facing calls to cut interest rates as global central banks pivot and the economy shows signs of moderating. The governor has repeatedly said he’s not considering a cut yet and wants to see inflation easing to the 4% target and staying there.

Given the timing of their appointment just before the MPC meeting, analysts don’t expect they will have enough time to acquaint themselves with the issues to call for a rate cut. Economists surveyed by Bloomberg predict the RBI will likely ease in December.

RBI doves

The external MPC members who end their terms have been more dovish than their RBI counterparts in recent rate meetings. Both Goyal and Varma voted for rate cuts in the past two meetings. Bhide raised concerns about the impact of high rates on economic growth, even though he voted in line with RBI officials.

How are MPC members selected?

The MPC is chaired by the RBI governor and has six members. The RBI has three representatives, including the governor, while the other three are external members.

A selection panel — led by RBI Governor Shaktikanta Das, Cabinet Secretary T.V. Somanathan and Economic Affairs Secretary Ajay Seth — chooses the external MPC members. Prime Minister Narendra Modi’s office has final sign-off on the positions.

The external members, usually well-known economists with academic backgrounds or specialists in finance and macroeconomics, are appointed for a four-year term.

Analysts, as per a Bloomberg report say, “India should follow other central banks in having a more transparent process in selecting key candidates.”

Appointments of key RBI officials are typically made ahead of time, aside from the 2020 debacle, which was partly due to disruptions over the pandemic period.