The Indian Government appointed three eminent academics as independent members of the MPC. The constitution of this committee heralds a new era in setting policy interest rates which until now was the domain only for India’s central bank, RBI. The six member MPC met for the first time ahead of October 4th monetary policy and was unanimous in its decision to cut Repo rate by 25 bps.
This is a positive step for developing a new monetary policy framework for India. The choice of the independent members is appreciated by the markets as each of the academics are well-known Economists. After analysing their published research, we believe that each one of them has a bias towards “softening” of interest rates in order to stimulate growth in the economy.