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Monetary Policy Committee (MPC): Functions and Constitution

Relevance:

  • GS Prelims 2019, GS Mains paper III
  • Economy, Monetary Policy Committee

Why in news?

  • The six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) on 6th June, 2018 increased the repo rate by 25 basis points to 6.25%.

Functions of the MPC:

  • The Reserve Bank of India Act, 1934 (RBI Act) was amended by the Finance Act, 2016,  to provide for a statutory and institutionalised framework for a Monetary Policy Committee, for maintaining price stability, while keeping in mind the objective of growth.
  • The Monetary Policy Committee would be entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level.
  • The committee was created in 2016 to bring transparency and accountability in fixing India’s Monetary Policy.
  • The meetings of the Monetary Policy Committee shall be held at least 4 times a year and it shall publish its decisions after each such meeting.

Constitution of MPC:

  • As per the powers conferred by section 45ZB of the Reserve Bank of India Act, 1934, the Central Government will constitute the members of the MPC.
  • There will be 6 members of the MPC.
  • 3 Members will be from the RBI and the other 3 Members of MPC will be appointed by the Central Government.
  • The external members (appointed by the central government) will have a four year term.
  • The Governor of Reserve Bank of India is the chairperson ex officio of the committee.

Following are the members of the first and current MPC:

  • The Governor of the Bank—Chairperson, ex officio;
  • Deputy Governor of the Bank, in charge of Monetary Policy—Member, ex officio;
  • One officer of the Bank to be nominated by the Central Board—Member, ex officio;
  • Shri Chetan Ghate, Professor, Indian Statistical Institute (ISI) —Member
  • Professor Pami Dua, Director, Delhi School of Economics (DSE) — Member
  • Ravindra H. Dholakia, Professor, Indian Institute of Management (IIM), Ahmedabad—  Member

India’s Changing Foreign Policy

 

Relevancy

  • GS Mains Paper- 2
  • International Relations

Why in news?

  • In recent times union government has shifted considerably in its policy signaling with his neighboring nations.

What are India’s recent stands on foreign policies?

  • Indian Prime Minister visited Indonesia, Malaysia and Singapore, three of India’s most important partners in Southeast Asia recently for foreign policy positioning.
  • In the past few months, the government has shifted considerably in its signaling, with China and Russia for informal summits.
  • These measures have taken place at a time the U.S. administration has sharpened its aim at China and Russia with sanctions and threats of a trade war.
  • India tries for a strategic posturing on the global stage, and striving for a more balanced approach in what it increasingly sees as an uncertain world.

What are the significant foreign policy improvements?

  • India has maintained its commitment to relations with the U.S. in order to build a “free and open” Indo-Pacific region, maintain the “international rules-based order”.
  • It plans to work together to combat terrorism and terror financing as they have done more recently at the UN and the Financial Action Task Force.
  • India’s has showed its interest in membership of the Quadrilateral with the U.S., Japan and Australia to tackle Chinese influence in south Asian region.
  • At the same time India has also ready to co-operate in Shanghai Cooperation Organisation the Russia-China-led grouping of Central Asian countries.
  • It is significant that in Singapore India chose the platform of the Shangri-La Dialogue of defence leaders of the Asia-Pacific region to emphasise Indian “strategic autonomy”.

What is India’s plan on Shangri-La dialogue?

  • The Shangri-La Dialogue (SLD) is a “Track One” inter-governmental security forum held annually by an independent think tank International Institute for Strategic Studies (IISS).
  • It is attended by defence ministers, permanent heads of ministries and military chiefs of 28 Asia-Pacific states.
  • The summit serves to cultivate a sense of community among the most important policymakers in the defence and security community in the region.
  • In the recent meet India has referred the concept of the “Indo-Pacific” to India’s relations with Russia, the U.S. and China.
  • India used the dialogue to unveil a seven-point vision for the Indo-Pacific region.
  • While warning the world about the possible return of “great power rivalries”, India emphasised the importance and centrality of the ASEAN in the concept of the Indo-Pacific.

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