Discuss briefly the recommendations of the expert committee constituted "To revise and strengthen the…

Question

Discuss briefly the recommendations of the expert committee constituted "To revise and strengthen the monetary policy framework".

Ghissu Editorial · Accepted Answer

The 2013 Urjit Patel committee recommended flexible inflation targeting at 4% CPI (plus or minus 2%), decided by a Monetary Policy Committee chaired by the RBI Governor. It also sought published minutes within 14 days and five-yearly reviews, and the 2016 RBI Act amendment enacted the framework.

**Introduction**

The expert committee aimed to revise and strengthen India’s monetary policy framework to improve inflation control and support growth amid persistently high inflation, financial liberalisation and global shocks. This revision was essential to enhance macroeconomic stability and respond to evolving economic challenges, including the specific fiscal and developmental needs of states like ==Andhra Pradesh==.

**Key Recommendations**

1. **Inflation Targeting⟦1⟧ Regime⟦2⟧**: The committee recommended adopting a CPI inflation target of 4% with a ±2% band, formalized in the 2015 Monetary Policy Framework Agreement, to anchor inflation expectations and enhance policy credibility. This nominal anchor replaced the earlier multiple indicator approach, providing clarity and focus.

2. **Monetary Policy Committee⟦3⟧ (MPC)**: It proposed a five-member MPC, enacted in 2016 as a six-member body with three RBI officials and three government nominees, to democratize and depoliticize monetary policy decisions, improving transparency and accountability. The MPC’s decisions, voting patterns, and minutes are published within 14 days to ensure openness.

**Purpose and Rationale**

3. **Price Stability with Growth Support**: The framework prioritizes price stability while supporting sustainable growth, crucial for states like ==Andhra Pradesh== with sensitive agrarian and industrial sectors. Stable inflation reduces uncertainty, encouraging investment and consumption.

**Way Forward**

5. **Periodic Reviews and Adaptation**: The RBI’s 2025 review of the inflation targeting framework underscores the need for ongoing evaluation to incorporate institutional lessons and evolving economic conditions. Regular reviews every five years will keep the framework relevant.

**Conclusion**

The committee’s reforms have modernized India’s monetary policy, balancing inflation control with growth, enhancing transparency, and ensuring adaptability to economic shocks for sustainable development. This framework supports inclusive growth aligned with India’s long-term development goals.

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