RBI's rate-setting panel meets to finalise inflation report for govt
It is the first time since the monetary policy framework came into effect in 2016 that the RBI has had to give an explanation to the government
The Reserve Bank’s rate setting panel on Thursday (November 3) met to finalise a report for the government on why it failed to keep retail inflation below the target of 6 per cent for three consecutive quarters since January this year, said sources. The report will be presented to the government as per the Reserve Bank of India Act.
The six-member Monetary Policy Committee (MPC) is headed by Governor Shaktikanta Das. The other members are Shashanka Bhide, Honorary Senior Advisor at National Council of Applied Economic Research, Delhi; Ashima Goyal, Emeritus Professor at Indira Gandhi Institute of Development Research, Mumbai and Jayanth R Varma, Professor at Indian Institute of Management, Ahmedabad.
RBI Deputy Governor Michael Debabrata Patra and RBI Executive Director Rajiv Ranjan are the other two members.
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The RBI Act requires the central bank’s MPC to report to the government reasons for failure to meet the retail inflation target as well as measures to bring it at 4 per cent with a margin of 2 per cent on either side. The meeting was called under the provisions of Section 45ZN of the RBI Act 1934.
Explanation for first time
It is the first time since the monetary policy framework came into effect in 2016 that RBI has had to give an explanation to the government.
The retail inflation based on Consumer Price Index (CPI) has remained above 6 per cent since January 2022. It was 7.41 per cent in September. The MPC factors in retail inflation while deciding the bi-monthly monetary policy.
Also read: Inflation check: What RBI’s Nov 3 special meeting of MPC is all about
On Wednesday, Das defended RBI’s policies saying the economy would have taken a “complete downward turn” if it had started to tighten interest rates earlier. The RBI began raising interest rates in May to contain the high inflation in the backdrop of the Russia-Ukraine war and subsequent disruptions in the global supply chain.
Since May, the RBI has raised the short term lending rate (repo) by 190 basis points taking it to a nearly three-year high of 5.9 per cent.
With agency inputs
