What is the Monetary Policy Committee (MPC)?
The Monetary Policy Committee (MPC) is a statutory body responsible for fixing India’s policy interest rate (Repo Rate) to control inflation and ensure price stability.
- It is a key institution under the inflation targeting framework in India.
Legal & Institutional Basis
- Established under Reserve Bank of India Act, 1934 (amended in 2016)
- Works under Flexible Inflation Targeting (FIT) framework
- Central Bank: Reserve Bank of India (RBI)
Composition of MPC-6 members
| Members | Appointing Authority |
|---|---|
| RBI Governor (Chairperson) | RBI |
| Deputy Governor (Monetary Policy) | RBI |
| One RBI official | RBI |
| Three external members | Central Government |
How MPC Works?
- Meets at least 4 times a year (usually 6 times)
- Decisions taken by majority voting
- Each member has one vote
- In case of tie → Governor has casting vote
MPC and inflation targeting:
The Monetary Policy Committee (MPC) in India manages a Flexible Inflation Targeting (FIT) framework, aiming to maintain Consumer Price Index (CPI) inflation at 4% with a ±2% tolerance band (2%-6%). This mechanism, set every five years, prioritizes price stability while supporting growth, with accountability to the government if targets are missed for three consecutive quarters.
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