The new agreements say that the central bank "shall be seen to have failed to meet the target if inflation is more than 6% or less than 2% for three consecutive quarters"
The new government has ushered in an environment of change and this has led to birthing of a new rule for the Reserve Bank of India. As per a new agreement on the “monetary policy framework” which has been signed between the government and RBI a week before Union Budget was declared, the central bank governor will now have to justify the reasons for not being able to meet the inflation target for the country, according to media reports.
The new agreements say that the central bank "shall be seen to have failed to meet the target if inflation is more than 6% or less than 2% for three consecutive quarters". Inflation must be below 6% by January 2016, and a band of 6-2% for 2016-17 and subsequent years.
The Governor will have to write a letter to the government, if inflation is not harnessed as per the set target, in which it would be mandatory to state the reasons of price hike as well as the solution and time frame to get inflation back in check.
The government could also make this protocol public like other countries in order to root out the main causes of soaring prices.
Going back to the event of Budget 2015, Finance Minister Arun Jaitley had candidly mentioned that the RBI Act would be amended in order to formulate a monetary policy committee. However, the committee composition is still pending and will be processed when the RBI Act gets amended, as per reports.
Low inflation is a requisite for India’s growth and reigning the same is the chief role of RBI believe RBI Governor Raghuram Rajan and his deputy Urjit Patel, as per a report
The new agreements say that the central bank "shall be seen to have failed to meet the target if inflation is more than 6% or less than 2% for three consecutive quarters". Inflation must be below 6% by January 2016, and a band of 6-2% for 2016-17 and subsequent years.
The Governor will have to write a letter to the government, if inflation is not harnessed as per the set target, in which it would be mandatory to state the reasons of price hike as well as the solution and time frame to get inflation back in check.
The government could also make this protocol public like other countries in order to root out the main causes of soaring prices.
Going back to the event of Budget 2015, Finance Minister Arun Jaitley had candidly mentioned that the RBI Act would be amended in order to formulate a monetary policy committee. However, the committee composition is still pending and will be processed when the RBI Act gets amended, as per reports.
Low inflation is a requisite for India’s growth and reigning the same is the chief role of RBI believe RBI Governor Raghuram Rajan and his deputy Urjit Patel, as per a report
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