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MPC meeting and current economic scenario

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September 30, 2017

Why in news?

The Monetary Policy Committee meeting has been scheduled on first week of October.

What the characteristics of monetary policy committee?

  • The Monetary Policy Committee (MPC) is a committee of Reserve Bank of India, headed by its Governor.
  • It is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the specified target level of 4% with a band of +/- 2%.
  • There are six Members of Monetary Policy Committee, three Members will be from the RBI and the other three Members will be appointed by the Central Government.
  • The panel is required to meet at least four times in a year.
  • It should submit a report to the central government within one month from the date which the bank has failed to meet the inflation target.

What is the present economic scenario?

  • The gross domestic product (GDP) growth for the three months to June this year fell to 5.7%, lowest since 2014.
  • Inflation consumer price index (CPI)-based inflation rose to a five-month high of 3.36% in August.
  • Agriculture growth in real terms slowed to 2.3% from 5.2% in the fourth quarter.
  • Services sector growth has increased to 8.7% from 7.2%, driven by improvement in trade, hotels, transport and financial services.
  • Investments have slowed down and several large industries are reporting low capacity utilisation.
  • The slowdown has attributed to net profits decline for many listed corporate firms.

http://images.financialexpress.com/2017/09/Graph-1.jpg

Way forward

  • MPC has maintained a neutral outlook, citing uncertainties in inflation trajectory.
  • Now there is a compelling case for RBI to ease the policy rate to support growth.
  • The panel will have to look at ways to spur lending and consumption, and revive the economy.

 

Source: Financial Express

 

 

 

 

 

 

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