The Centre on Thursday named three academics trained in economics as the external appointees on the monetary policy committee (MPC) that will work with the Reserve Bank of India’s three members to decide interest rates. The RBI is represented on the MPC by Governor Urjit Patel, Deputy Governor in-charge of monetary policy R. Gandhi, and M.D. Patra, the executive director who was nominated by the RBI board.
The three external members — Pami Dua, Chetan Ghate and Ravindra Dholakia — will have a fixed four year term, which is non-renewable.
The RBI will set interest rates according to the majority view of the six-member MPC, with the Governor having the casting vote in case of a tie.
While the Centre did not specify if the newly constituted monetary panel will decide interest rates at the RBI’s next policy review, scheduled for October 4, analysts speculated that the MPC may start work straightaway.
“The appointment of the new MPC may have implications for monetary policy,” Nomura economists Sonal Verma and Neha Saraf wrote in a note to clients. “The coming October 4 monetary policy meeting could now be MPC based, although this is not yet confirmed and could be a challenge because of very few days left before the next policy meeting,” they wrote.
The MPC will be responsible for ensuring inflation based on the Consumer Price Index is contained within a range of 2 per cent to 6 per cent, a target announced as part of the new monetary policy framework agreed to by the Centre and the RBI.
Previously, decisions were taken by the RBI Governor. The move to inflation targeting and committee based rate-setting were part of changes recommended by former Governor Raghuram Rajan and then Deputy Governor Dr. Patel.
The three new external members of the MPC are low-key academics, who are expected to help provide independent external economic inputs for policy formulation.
Pami Dua is the Director of the Delhi School of Economics. Her research work spreads across different fields like business cycle analysis, macroeconomics, econometrics, and forecasting.
Dr. Dua, an expert on econometrics and forecasting, has a Ph.D. from the London School of Economics. She was earlier the head of the department of Economics at the Delhi School of Economics, where she teaches courses in time series analysis, forecasting methods and applications, macroeconomic theory and financial markets. She is also the Chairperson of the Agricultural Economics Research Centre, at the University of Delhi.
Some of her recent working papers related to the impact of global recession and eurozone debt crisis on exports of China and India, analysis of foreign portfolio investment flows to India, modelling and forecasting the rupee-dollar exchange rate.
Chetan Ghate is the only member of the Technical Advisory Committee on Monetary Policy who becomes a member of the MPC, and is therefore familiar with the RBI’s policy making process. (The TAC, which had an advisory role, will cease to exit after the MPC becomes operational). He was also a member of the committee that was set up by Dr. Rajan to review and strengthen the monetary policy framework. The committee was headed by Dr. Patel.
Dr. Ghate, who is a professor at the Indian Statistical Institute, Delhi, is a macroeconomist with a research focus on economic growth, fluctuations, economic development, and monetary and fiscal policy in developing and emerging market economies. Dr. Ghate has a Ph.D. from Claremont Graduate School, California.
Ravindra Dholakia is a faculty member of Economics at the Indian Institute of Management, Ahmedabad, since 1985. Dr. Dholakia, whose Ph.D. thesis was on regional disparities in economic growth in India, served as an independent director on the boards of several corporations including Gujarat State Financial Services, Adani Enterprises, Union Bank of India, Air India, and Gujarat State Petroleum Corp.