The Centre is working on setting up a Monetary Policy Committee and hopes to have it in place within the next few months.
“This is a work in progress… Our effort is to have the Committee in place by September,” Economic Affairs Secretary Shaktikanta Das told BusinessLine .
While the passage of the Finance Act in Parliament had cleared the way for setting up the Committee, there were doubts on whether it would now be delayed until a new RBI Governor is appointed.
RBI Governor Raghuram Rajan had announced his decision to return to academia in September, when his current three-year term comes to an end.
While declining to comment on Rajan’s exit, Das said the government will notify the rules for the Monetary Policy Committee “very soon”.
“Under the amended Reserve Bank of India Act, the Rules will be notified shortly… it could happen by next week,” he said.
The Finance Ministry will then begin the process of nominating three members to the Committee. “After the Rules have been notified, the selection committee will meet. We have to nominate three members,” he said.
An agreement for a monetary policy framework was signed between the RBI and the Finance Ministry in January last year. The six-member committee will set interest rates to lower consumer price inflation to 4 per cent from 2016-17. Each member of the committee will have one vote and the RBI Governor will have a second or casting vote, in case of a tie.
In his recent message to RBI staff, Rajan had listed the formation of the MPC as one of two targets yet to be completed. “Inflation is in the target zone, but the Monetary Policy Committee that will set policy has yet to be formed,” he had said while announcing his decision not to seek a second term.