NEW DELHI: The government has appointed three members to the monetary policy committee, completing the appointment process of the crucial panel that decides interest rates.
According to a notification, Ashima Goyal, Shashanka Bhide and Jayanth R Varma will be the three nominees on the committee. The three seats have been vacant since the term of the previous members: Chetan Ghate, Pami Dua and Ravindra Dholakia whose term ended in September 22, 2020.
All three members, who have been appointed for a period of four years i.e. till October 2024, will join RBI governor Shaktikanta Das, deputy governor Michael Patra and executive director Mridul Saggar on the committee.
Who are the new MPC members?
Ashima Goyal: A professor at the Indira Gandhi Institute of Development Research in Mumbai. She has been a member of the Prime Minister’s Economic Advisory Council under the leadership of Bibek Debroy since 2017. Goyal is also an independent director at Edelweiss Financial Services, IDBI Bank and SBI General Insurance. She has also authored and edited a number of books including Macroeconomics and Markets in Developing and Emerging Economies (Routledge: UK. 2017) and A Concise Handbook of the Indian Economy in the 21st Century (OUP: India, 2019).
Shashanka Bhide: He is a senior advisor of research programs at the National Council of Applied Economic Research (NCAER) in Delhi. His research has covered a number of areas in agriculture, macroeconomic modelling, infrastructure and poverty analysis, according to the NCAER website. Bhide also serves as a member of Board of Governors of the Institute for Social and Economic Change in Bangalore. He has a Ph.D. in agricultural economics from Iowa State University, Ames, M.Sc from Indian Agricultural Research Institute in New Delhi and B. Sc in agriculture from University of Agricultural Sciences, Bangalore.
Jayanth R Varma: A professor of finance and accounting at IIM Ahmedabad. He has served on several committees on financial market regulation and reform, and held a number of corporate board positions over the years. He has also served as a full-time member of securities regulator SEBI for one year. Before that, he was a part-time member of SEBI for three years. Varma was also a member of the Raghuram Rajan Committee on Financial Sector Reforms and of the Financial Sector Legislative Reforms Commission. He has been on the Board of several companies: Axis Bank, Bharat Petroleum Corporation, Gujarat International Finance Tec-City Company Limited, Infosys BPM Limited and Punjab National Bank.
These three members are expected to bring academic depth and experience to the policy deliberation process. Given their past track record, the newly constituted members bring in expertise in macroeconomics, agriculture, development economics and financial markets. Goyal has been a member of RBI’s technical advisory committee, and has expressed dovish views in the past. Varma is seen as a financial markets expert, while Bhide specialises in rural and development economics.
Rules require at least four members to be present at the meeting, with at least one being the governor or, in his absence, the deputy governor, who is a member of the committee. However, the lack of a quorum in the panel after the government failed to fill up vacancies for the committee's three external members on time prompted RBI to reschedule its three-day MPC meeting that was scheduled to begin on September 29. The new dates for the MPC meeting will be notified shortly, the RBI had then said.
The distinguished six-member committee has only one job: gauge economic variables and forecast its policy direction either through rate cuts or consecutive hikes. This time, to be sure, it is widely expected to stay neutral on interest rates given that inflation remains elevated. However, guidance on growth and inflation for the current financial year is keenly awaited by the market.
"The appointments are likely to bring some new thinking to the RBI's policy deliberations. But we do not believe it would dramatically change the near-term monetary policy outlook," said Rahul Bajoria, chief economist at Barclays India. In its last policy meeting, the RBI's MPC voted unanimously to hold interest rates. "Given our new inflation forecast trajectory, we believe that room to cut rates further will likely open up only in Q1 2021. Hence we expect a one-off rate cut of 25 bps in the February 2021 MPC meeting. In the meantime, the central bank may continue to ease financial conditions through liquidity and regulatory measure," Bajoria noted.