BENGALURU: RBI Governor Raghuram Rajan lately named Michael Patra as the central bank's executive director in charge of monetary policy. Michael will be serving as the third member to represent the RBI in the Monetary Policy Committee (MPC). The other two members—who will be the ex officio chairperson—are the RBI governor, and deputy governor in charge of monetary policy. The move seems to come in even as the government is yet to appoint the next RBI governor.

Interest rates have to be set by the six-member MPC and not the governor, accordance to the new monetary policy model. The newly framed policy is said to be historic as this is the last time in the RBI's 81-year of history that a governor determine on interest rates.

"Everything is in place for a Monetary Policy Committee except the selection of members. That the government has to decide on and the process has started," said Rajan, adding that there is some likelihood that the committee will be in place for the October 2016 review. "If that is the case, there will be six people sitting together and deciding what the path of interest rates will be. I think, we should expect them to take an independent decision and I am sure they will," said Rajan.

The formation of the MPC is focused in modernizing India’s monetary policy framework and builds a strong and sustainable growth platform, and the RBI will undergo complete reform, according to the governor. "Some of the collateral benefits over and above low inflation will be a currency that is not depreciating constantly, higher real returns earned by savers, and lower nominal interest rates, including inflation risk premia, paid by borrowers," said Rajan.

More adept data collection on all fronts—employment and GDP—would certainly help policy making, he stated. It would be difficult to base policy on present labour data as the labour ministry is still collecting data on employment.

On the future standpoint, Rajan said, he expected inflation to be at around 5 percent by March 2017. On growth, he said that the outlook had been vitiated by consecutive downgrades of projections in global growth by multilateral agencies and extended sluggishness in world trade. That is the reason behind RBI conclusion to retain the gross value-added projection at 7.6 percent, for current fiscal.

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