India’s government has picked three economists from the academic world for a new monetary policy committee (MPC) to set interest rates, as the Reserve Bank of India (RBI) gets ready for a landmark switch in the way it decides policy.
They will join RBI Governor Urjit Patel and two senior officials from the bank’s monetary policy department. Patel, who took over the helm at the RBI this month, will have the casting vote in the event of a tie.
The non-RBI members named are Chetan Ghate, a professor at Indian Statistical Institute; Pami Dua, a director at the Delhi School of Economics; and Ravindra Dholakia, a professor at the Indian Institute of Management in Ahmedabad, in Prime Minister Narendra Modi’s home state of Gujarat.
All are low-profile and India-based, unlike Patel or his predecessor Raghuram Rajan, who had both worked at the International Monetary Fund at one point before joining the RBI.
A former IMF chief economist, Rajan was feted on the global policy circuit, but he rubbed up Modi’s nationalist supporters the wrong way with his blunt social commentary about India.
The ministry did not specify whether the panel would set rates on Oct. 4, the next scheduled RBI policy review, and the first to be held under Patel.
The committee will be responsible for ensuring consumer inflation stays within 2 to 6 percent, a target announced this year to anchor inflation in a country with a history of volatile consumer prices.
Previously, decisions had been taken solely by the RBI governor. The policy shift to targeting inflation and collective decision making was pushed through by Rajan and his then-deputy Patel in the biggest changes at the RBI since India opened up its economy in 1991.
But some details have yet to be revealed, including whether the panel would weigh in on managing the exchange rate or liquidity in the financial system.
The government has also yet to appoint a deputy governor to replace Patel, who headed monetary policy before his promotion, a position that gives the next selection a seat in the committee, along with Executive Director Michael Patra as the third RBI member.
