CNBC - The Omissions and Commissions of India’s MPC Framework
(The following article appeared on CNBCTV18 online on August 4, 2020 - URL below: https://www.cnbctv18.com/finance/view-the-omissions-and-commissions-of-indias-mpc-framework-6535921.htm ) The Omissions and Commissions of India’s MPC Framework India’s Monetary Policy Committee (MPC) is charged with setting the policy repo rate, and so containing CPI inflation between 2.0% and 6.0%, while keeping in mind growth. Does the core premise of this framework, that policy interest rates can control inflation in India in the conventional sense, hold water? Monetary policy is known to influence other parameters, such as the external sector, savings, investments, and employment. Does their omission from the framework make sense? Interest rates go well beyond the policy repo rate. Does it make sense to limit the MPC to the policy repo rate alone? We consider these questions in this article. In a sequel, we will explore alternative frameworks could be considered. The Inflation Commission