Prime Minister Narendra Modi had in a recent interview with a news channel talked at length about food inflation and how his government is trying all means to keep food prices from shooting through the roof.
Prime Minister had said, "The country has gone through two consecutive years of severe drought. Drought has a direct impact on the price of vegetables, food and pulses because all these things are produced from the soil. Now when there is such a big drought, it's not in anybody's hands." The second option in such a situation is imports. The Indian government has imported pulses in huge quantities. Third, it is the joint responsibility of the state and Central governments. It is not exclusively the state's responsibility. It is not exclusively the Centre's responsibility."
Prime Minister had further elaborated as to how many farmers have taken to cultivating sugar and thereby the production of pulses and vegetables has come down. He also promised that the government will undertake other measurers also to control food prices.
One means that the NDA Government will be using to control food inflation and ensure price stability is setting up of Monetary Policy Committee (MPC). The government is amending the Reserve Bank of India Act, 1934 (RBI Act) by the Finance Act, 2016. This is being done to provide for a statutory and institutionalised framework for a MPC.
Government initiates process to constitute Monetary Policy Committee (MPC) under the Reserve Bank of India Act, 1934 pic.twitter.com/PngKnyvKpo— Ministry of Finance (@FinMinIndia) June 27, 2016
The Government has brought the provisions of amended RBI Act regarding constitution of MPC into force on 27th June, 2016 so that statutory basis of MPC is made effective.
The Rules governing the Procedure for Selection of Members of Monetary Policy Committee and Terms and Conditions of their Appointment and factors constituting failure to meet inflation target under the MPC Framework have also been notified on 27th June, 2016.
Rules governing procedure for Selection of Members of Monetary Policy Committee &Terms & Conditions of their Appointment also notified today— Ministry of Finance (@FinMinIndia) June 27, 2016
Why Monetary Policy Committee:
A Committee-based approach it is said will add lot of value and transparency to monetary policy decisions.
Members of Monetary Policy Committee:
Out of the six Members of MPC, three Members will be from the Reserve Bank of India (RBI), including the Governor, who will be the ex-officio Chairperson, the Deputy Governor, RBI and one officer of RBI.
The other three Members of MPC will be appointed by the Central Government, on the recommendations of a Search-cum-Selection Committee, which will be headed by the Cabinet Secretary.
The role of the members:
These three Members of MPC will be experts in the field of economics or banking or finance or Monetary policy and will be appointed for a period of 4 years and shall not be eligible for re-appointment.
The meetings of the MPC shall be held at least 4 times a year and it shall publicise its decisions after each such meeting.