New Delhi: The government has on Thursday named three academics - Indian Statistical Institute professor Chetan Ghate, Delhi School of Economics director Pami Dua and Ravindra H Dholakia of IIM-Ahmedabad - as members on interest-rate setting Monetary Policy Committee.
MPC, which will take over the job of setting interest rate, will have six members, with the government and the Reserve Bank of India (RBI) appointing three persons each. Setting up of the panel will bring about a landmark change to how central bank decisions are made in the country.
The Appointments Committee of the Cabinet (ACC) cleared the three eminent experts as members on the MPC for a period of four years "or until further orders, whichever is earlier," a government notice said. RBI nominees will include, governor, a deputy governor and one more person from the central bank.
Ghate was part of a five-member technical advisory committee that provided non-binding advice on interest rates to the RBI governor ahead of each policy review.
He was also a member of the panel that in 2014 recommended the changes to monetary policy, including targeting inflation and establishing a panel to decide rates.
All are low-profile, India-based economists, unlike former Reserve Bank of India chief Raghuram Rajan, a fixture on the global policy circuit who rubbed Modi's nationalist supporters up the wrong way with his blunt social commentary about India.
The committee will be responsible for ensuring consumer inflation stays within a range of 2 to 6 percent, a target that was previously announced by the government.
It represents a marked change to monetary policy, which was previously decided solely by the RBI Governor.
To facilitates this change, the government earlier this year amended the RBI Act. As per the agreement between the government and the RBI there will be six members in the committee of which three will be nominated by the government. The three others will be from the Reserve Bank of India, including the Governor.
The Monetary Policy Committee will take decision based on the majority vote. Each member will have one vote but RBI Governor will get a casting vote in case of equality of votes.
Earlier, a draft released by the government in July last had suggested doing away with RBI Governors veto power and proposed a 7-member panel to take rate decisions by a majority vote.
Today's statement did not, however, specify whether the panel would set interest rates on 4 October, the next scheduled RBI policy review, and the first to be held under Urjit Patel, who was appointed governor last month.