RBI Refused to Attend Meetings with Center

The MPC(Monetary Policy Committee) is a council of six members that sets benchmark interest rates. Predecessor Raghuram Rajan was given full authority of setting interest rates, but many had opposed and new arrangements were made to set up MPC which is less than a year old now. It is appreciable RBI stood firm in its decision. The committee was questioned on the grounds that Rajan left due to undesirable circumstances and out of the blue event of withdrawing currency from circulation. November onwards, a series of unpleasant situations are being faced by the government.Federal Ministry of Finance decided for a meet at New Delhi and the members of MPC refused for it. MPC anyway knew they were called to cut rates. India was already facing a trouble tackling private sector investments. Yet the MPC had turned a deaf ear to participate in the meeting and kept the rates stable. The resolution stood strong even after inflation rates had fallen down. This emerges from the agreement between central bank and government to shift targeting consumer price inflation. The government is in a baffled situation from then.RBI has not completely ignored, inflation period from 6 months (April-September) consumer price inflation has been revised. It has witnessed sharp decline from 4.5% to between 2% and 3.5% lying below the target rate of 4%.Why the rates are not cut?There are two prominent reasons. Firstly, after the cash shortage there has been significant decrease in inflation rate. Demonetisation has its effects on prices of agricultural  goods, especially on the food staples that dominate India’s CPI , and now facing crash. Secondly, it is government’s duty to revive investment and not the job of MPC.Without dissembling and rather than meeting setups, other ministers are to be questioned about the slow pace of reforms.
Saurabh Jain
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RBI Refused to Attend Meetings with Center

Saurabh Jain
Blog
19th Jun, 2017
RBI Refused to Attend Meetings with Center

The MPC(Monetary Policy Committee) is a council of six members that sets benchmark interest rates. Predecessor Raghuram Rajan was given full authority of setting interest rates, but many had opposed and new arrangements were made to set up MPC which is less than a year old now. It is appreciable RBI stood firm in its decision. The committee was questioned on the grounds that Rajan left due to undesirable circumstances and out of the blue event of withdrawing currency from circulation. November onwards, a series of unpleasant situations are being faced by the government.

Federal Ministry of Finance decided for a meet at New Delhi and the members of MPC refused for it. MPC anyway knew they were called to cut rates. India was already facing a trouble tackling private sector investments. Yet the MPC had turned a deaf ear to participate in the meeting and kept the rates stable. The resolution stood strong even after inflation rates had fallen down. This emerges from the agreement between central bank and government to shift targeting consumer price inflation. The government is in a baffled situation from then.

RBI has not completely ignored, inflation period from 6 months (April-September) consumer price inflation has been revised. It has witnessed sharp decline from 4.5% to between 2% and 3.5% lying below the target rate of 4%.

Why the rates are not cut?

There are two prominent reasons. 

  • Firstly, after the cash shortage there has been significant decrease in inflation rate. Demonetisation has its effects on prices of agricultural  goods, especially on the food staples that dominate India’s CPI , and now facing crash. 
  • Secondly, it is government’s duty to revive investment and not the job of MPC.

Without dissembling and rather than meeting setups, other ministers are to be questioned about the slow pace of reforms.

Saurabh
Blog Author

 

One of the Co-founders, Saurabh serves as an active advisor to several SaveDesk’s portfolio companies and also works closely with them to improve business performance, select key management personnel, ensuring statutory and financial oversight and compliance supported by various agreements.Prior to SaveDesk, Saurabh spent seven years with Standard Chartered Bank commercial banking team as an associate director, where he was responsible for client management,financial analysis, portfolio management and large ticket deal’s execution in South India. Saurabh holds an MBA in Marketing from the Institute of Technology Management, and graduated with Honors degree in Electrical and Electronics Engineering from RGPV, Madhya Pradesh

 

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