Deliberations and Resolutions of Monetary Policy Committee – An Analysis

Abstract

Monetary Policy Committee, MPC, and its resolutions/decisions play an important role as they influence Consumer Price Index (CPI) inflation and also the economic growth. In accordance with an understanding between the Government of India (GoI, Government) and the Reserve Bank of India (RBI, apex bank), the Government has set (in consultation with the apex bank) the CPI inflation at 4 per cent for the period from 5 August 2016 to 31 March 2021 with 2. If it (i.e., CPI inflation) exceeds the upper limit or falls below the lower limit for three quarters continuously, it will be construed as failure to achieve the inflation target. Hence, the MPC has greater responsibility and its decisions impact all walks of life – primary, secondary and tertiary sectors in one way or the other, and both directly and indirectly. This committee had its sixth meeting on August 1 and 2, 2017 and taken a decision to cut down the Repo Rate, with immediate effect, by 25 basis points to 6 per cent – the lowest since November 2010. Consequently, the Reverse Repo Rate has been cut by 0.25 per cent to 5.75 per cent. This decision is based on perusal of recent developments in the economy, both globally and in the domestic economy, and also the outlook for the future. In this background, this paper makes an attempt analyse and present various dimensions of MPC – its composition, deliberations, resolutions, and also the statements by the members as to why they voted in favour of the subject or against it.