Monetary Policy 22 Sep 2016 by Tojo Jose

Academicians fills government’s slot in the monetary policy committee

Academicians fills government’s slot in the monetary policy committee

Government has appointed three academicians from the country’s renowned institutions as its nominees to the newly formed Monetary Policy Committee (MPC). Chetan Ghate, Professor at Indian Statistical Institute, Pami Dua, director at Delhi School of Economics and Ravindra Dholakia professor of IIM Ahmedabad are named by the government as its three representatives to the Committee. The MPC is a newly constituted body for taking decisions on setting the repo rate. It was established to facilitate monetary policy decision making in the new inflation targeting regime. Governor of the RBI is the Ex – Officio Chairman of the MPC. Of the six members, government and the RBI wil

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Monetary Policy 23 Aug 2016 by Tojo Jose

Government to complete the formation of Monetary Policy Committee

Government to complete the formation of Monetary Policy Committee

The government is about to complete the setting up of the Monetary Policy Committee by appointing three of its nominees to it. The MPC has six members; three each from the RBI and the government. RBI’ Governor is the ex-officio member of the Committee. Raghuram Rajan has nominated the Executive Director Michael Patra as one member and the remaining member from the RBI is to be selected from its Deputy Governors. As a fresh mechanism to navigate monetary policy interventions, the role and functioning of the MPC will be keenly observed as it will substitute the existing Technical Advisory Committee. Unlike the TAC, the MPC doesn’t gives any extra voting power to the Go

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Monetary Policy 20 Aug 2016 by Tojo Jose

Urjit Patel is the new RBI Governor

Urjit Patel is the new RBI Governor

Deputy Governor of the RBI, Urjit Patel has been chosen by the government as the successor of the outgoing Governor Raghuram Rajan. Patel will become the 24th governor of central bank after the term of Rajan by next month. Patel was appointed as the deputy governor of RBI in 2013 before that he worked with IMF and with the Boston Consulting Group. From 2013 onwards, he took charge of the RBI’s monetary policy department and most importantly chaired the committee on Monetary Policy Framework that suggested the present inflation targeting framework. In the RBI, Patel is known as the architect of the new inflation targeting monetary policy framework. The new Governor was appo

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Monetary Policy 10 Aug 2016 by Tojo Jose

RBI’s bad loan cleanup mechanism is prudent -says Raghuram Rajan

RBI’s bad loan cleanup mechanism is prudent -says Raghuram Rajan

In his last monetary policy declaration, Governor Raghuram Rajan asserted that the RBI is comfortable with bad loan recognition process by banks. In a nearly non-event policy statement, Rajan has engaged the most disturbing element of his term – rising bad debts with banks. Criticism from several quarters including from the Supreme Court has raised doubts about the ability of existing arrangements including the issue of handling wilful defaulters to check NPAs. “Banks have certainly taken a lot of steps… the culture of cleaning up seems to be well embedded as well as the culture of recovery on some of the loans” Rajan told the media. The RBI had deployed

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Monetary Policy 08 Aug 2016 by Tojo Jose

Raghuram Rajan to make his valedictory policy review before the MPC’s take over

Raghuram Rajan to make his valedictory policy review before the MPC’s take over

Tomorrow’s bi-monthly monetary policy review by the outgoing Governor Raghuram Rajan is going to be the last one for a ‘powerful’ RBI Governor. As of now, the Governor has the veto power while taking interest rate policy decisions.  But under the proposed MPC (Monetary Policy Committee) format, the Governor has only a casting vote. This means that tomorrow’s policy declaration will be the last one where Governor has the ultimate say in repo rate policy whatever may be the stand of other members. Government has already announced the formation of the MPC and it is expected that the next monetary policy decision will be taken by the MPC in early Septembe

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Monetary Policy 07 Aug 2016 by Tojo Jose

Government formally inducts inflation targeting with flexible failure interpretation

Government formally inducts inflation targeting with flexible failure interpretation

The government has notified the introduction of Inflation Targeting (IT) monetary policy framework as a macroeconomic policy approach for the conduct of the RBI’s monetary policy. The fresh element as per the government’s notification is the interpretation of monetary policy failure and the launch time for correction measures. As per the policy, if inflation goes above 6% or goes below 2% for three consecutive quarters, then it will be treated as the failure of the RBI’s monetary policy. Counteractive measures should be initiated in such a scenario. Already, the government has created a Monetary Policy Committee by inducting three members each from the RBI and t

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Monetary Policy 28 Jun 2016 by Tojo Jose

Government Constitutes Monetary Policy Committee

Government Constitutes Monetary Policy Committee

The centre has notified the formation of Monetary Policy Committee (MPC) under the RBI which will take decision on interest rate or repo rate setting in future. MPC will bring significant changes in the power the RBI governor while deciding on repo rate. At present, the Technical Advisory Committee which is chaired by the Governor takes decisions on repo rate. But the RBI Governor has a veto power. According to the government sources, the MPC is responsible for bringing “value and transparency to monetary policy decisions. Under MPC, the governor has a casting vote and doesn’t enjoy veto power. Decisions will be taken on the basis of majority vote.  There are si

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Monetary Policy 19 Jun 2016 by Tojo Jose

Rupee and Market May make a ‘vote’ on Rexit tomorrow

Rupee and Market May make a ‘vote’ on Rexit tomorrow

Anxiety about how the Rupee and stock market will respond to the news of Raghuram Rajan’s exit is looming. Though Rajan was not a friend of market volatility makers or the so called speculator classes who loved low interest rate, his feat of producing stable macroeconomic fundamentals won investors mind. But the Chicago university professor’s exit may raise doubts in the minds of investors who prefer the long term stability of the economy.  Many foreign commentators who sells their ideas to global investors describe the entire issue as a victory of bad politics over sophisticated economics. In this context, the Rexit may leave doubt among investors about India's r

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Monetary Policy 14 Mar 2016 by Tojo Jose

Inflation records decline after five months

Inflation records decline after five months

The retail inflation has come recorded a decline to 5.18% from 5.69% for the month of February 2016. This is the first time after six months that CPI inflation records a fall. The present decline was contributed by fall in food prices including vegetables, pulses and fruits. So far India’s inflation data goes in contrast to the global trend. Major developing countries including China are in low inflation trajectories. Form many developed countries deflation and steep recession are the status on price and macroeconomic fronts. Most frequently, there is talk of deflation and decline in demand. For India, other data especially industrial production indicators are consistent w

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Monetary Policy 03 Feb 2016 by Tojo Jose

RBI expects stable inflation; urges investment promotion to sustain growth

RBI expects stable inflation; urges investment promotion to sustain growth

The RBI predicts a relatively stable inflation scenario for the next year. In its latest monetary policy revision where the key rates were kept constant, the central bank says that inflation is going within the trajectory set by the RBI. The new monetary policy revision that came in the budget month has kept the key policy rate - repo and other rates constant. According to the central bank, two positive factors – good monsoon and low crude prices may help the country to achieve a relatively low inflation rate of 5% during the next year. At the same time, the impact of the implementation of the VII Pay Commission report my put some upward pressure on prices. Observing that

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