The monetary policy logjam is on at Mint Street with the Narendra-Modi government yet to presumably find the three doves who could vote for a cut in interest rates in the Monetary Policy Committee (MPC) — an issue that the previous panel had increasing misgivings about because of surging inflation.
In the previous meeting that was held in August, the MPC had hit the pause button though it maintained an accommodative stance.
Early this week, the RBI postponed a three-day meeting of the MPC that was set to commence on September 29 as the appointment of three external members was delayed.
It was expected that the Centre would announce the new names during the course of this week, but that has not come about.
Conflicting reports on the delay have heightened the uncertainty: one section said the government was conducting background and security checks before the announcement. But there was also a buzz that the Centre has been unable to zero in on the three external members.
In 2016, when the MPC was empowered to set rates, the government had appointed Chetan Ghate, a professor at Indian Statistical Institute, Pami Dua, director at Delhi School of Economics (DSE), and Ravindra Dholakia, professor at the Indian Institute of Management, Ahmedabad, as independent members for four years.
Their term ended in August. Among them, Dholakia had a dovish approach, while Ghate had a hawkish tilt. Dua was seen to take a neutral stance.
However, the policy stasis at Mint Street has not only sent a poor signal but is also seen as a cause for worry because it was the major lever that was working to keep the system running even though interest rate cuts amid risk aversion by banks were ineffective in cranking up a floundering economy.
Yet there is speculation among economist circles on the various names that could replace Chetan Ghate, Pami Dua and Ravindra Dholakia. These include Ashima Goyal and Anantha Nageswaran, who are members of the Economic Advisory Council to the Prime Minister, and Abhiman Das, a faculty at IIM Ahmedabad, among a couple of others.
The apprehension is also that even if the Centre were to appoint the new members shortly, the actual meeting of the MPC may be at least two weeks away. The new members need adequate time to prepare before heading for the policy meeting.
However, Ananth Narayan, professor at SPJIMR, feels that the new members will be able to hit the ground running within a week of their appointment. “It is highly likely that members who are familiar with the monetary policy will be appointed. Following that, we could have a meeting in a week,’’ he told The Telegraph.
Ahead of the MPC meet, it was largely felt that the panel will leave the policy repo rate unchanged with retail inflation remaining at 6.69 per cent in August. However, the panel was also expected to give out a GDP growth forecast even as their commentary on the state of the economy was keenly awaited.
Dhanlaxmi Bank
Dhanlaxmi Bank on Thursday said that the RBI has approved a three-member interim committee of directors, headed by G Subramonia Iyer, to run the private sector bank after the shareholders voted out its MD and CEO Sunil Gurbaxani.
The shareholders rejected the resolution for appointment of Gurbaxani as MD and CEO at the 93rd AGM of the bank held on September 30.
