The first MPC has ended its term and the inflation target has to be reset in April 2021. In this context, Niranjan Rajadhyaksha raises three questions about the road ahead for the Indian monetary policy framework.
"The first monetary policy committee (MPC) appointed by the government to decide the benchmark interest rate in India ended its term this month. A lot has already been written on the voting pattern over the 24 meetings of this Reserve Bank of India (RBI) committee. A new MPC has to be appointed soon under the existing rules. The central bank’s inflation target has to be reset a few months later in April 2021.
How should the lessons of the past four years inform the journey ahead? This column takes a look at three important questions—on the inflation target, on the choice of nominal anchor, and on coordination of monetary policy with fiscal policy. Some of these questions are likely to dominate policy debates in the coming months."
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