MPC may be set up before RBI’s Oct policy review: Das

Economic affairs secretary Shaktikanta Das on Thursday said the monetary policy committee (MPC) may be set up before the October 4 policy review by the Reserve Bank of India (RBI). He said the central bank will take all factors into account and then take a decision, while emphasising there is a link between inflation and interest rates. The consumer price index-based inflation fell to a five-month low of 5.05 per cent in August.

He said the RBI has three members on the panel and once the government appoints three other members, the MPC can have its meeting.

There are good possibilities it should happen shortly, he said.

There is a bit of uncertainty as to whether the RBI would decide the policy rate in its October review or MPC. The RBI governor will have a casting vote in the committee, but unlike the present mechanism, he will not have a veto.

The October policy will be the first review meeting by new RBI governor Urjit Patel. In case MPC comes up by then, he will chair it.

On how soon a deputy governor will be appointed to the RBI following a vacancy, Das said there was a process to follow.

When asked whether some shortfall in monsoon against initial expectations raises worry on inflation, he said on the basis of the net area sown, the general expectation was that the crop would be good this year.

"Now consumer price index-based inflation has come down. I am sure the RBI will take into account all the factors and take a considered decision," he said.