The government has appointed three new external members to the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC). Ram Singh, Saugata Bhattacharya, and Nagesh Kumar will serve on the committee for four years. This decision was announced by the finance ministry, which stated that the MPC has been reconstituted.

The newly appointed members bring diverse expertise to the committee. Ram Singh is the director of the Delhi School of Economics. Saugata Bhattacharya is an economist, while Nagesh Kumar serves as the director and Chief Executive at the Institute for Studies in Industrial Development in New Delhi. These appointments are effective immediately or until further orders.

Monetary Policy Committee’s Role and Structure

The MPC, responsible for setting interest rates, is chaired by the RBI Governor. The committee includes six members: three from the RBI and three external members appointed by the government. Official members comprise the Deputy Governor in charge of monetary policy and the Executive Director of the Monetary Policy Department.

The first meeting of the reconstituted MPC is scheduled from October 7 to 9. Following this meeting, RBI Governor Shaktikanta Das will announce the bi-monthly monetary policy on October 9. The committee requires a minimum of four members to be present for its meetings to proceed.

Background and Previous Members

The MPC was initially formed in 2016 after finalising the Monetary Policy Framework Agreement, which introduced inflation targeting. The inflation target was set at 4%, with a tolerance range of plus/minus 2%. The original external members included Pami Dua, Chetan Ghate, and Ravindra H Dholakia.

The new appointees replace Ashima Goyal from the Economic Advisory Council of Prime Minister, Shashanka Bhide from the National Council for Applied Economic Research, and Jayanth Varma from IIM Ahmedabad. These changes aim to bring fresh perspectives to monetary policy decisions.

Appointment Process and Challenges

In 2020, a search committee led by Cabinet Secretary Rajiv Gauba recommended candidates for appointment. However, delays occurred due to incomplete processes like security clearances. The search committee included RBI Governor Shaktikanta Das, NITI Aayog Vice-Chairman Suman Bery, and Economic Affairs Secretary Ajay Seth.

The government’s notification dated September 29, 2016, had initially established the MPC with external members. This structure ensures that diverse viewpoints contribute to monetary policy decisions aimed at maintaining economic stability.