FinMin officials may meet RBI rate panel next week

Select finance ministry officials could meet members of the Reserve Bank of India’s monetary policy committee (MPC) before a decision on the key rate is announced on June 7.

An informal group of the economic affairs secretary, chief economic advisor and the principal economic advisor in the finance ministry is likely to meet the six members of the MPC on Thursday and Friday. The idea is to present the government’s views and opinions regarding inflation and growth, for the MPC to consider before the monetary policy review.

On Thursday, these officials are scheduled to meet the external members of MPC — Chetan Ghate, Pami Dua, and Ravindra Dholakia — in New Delhi. On Friday, a meeting is supposed to be held in Mumbai with RBI Governor Urjit Patel, Deputy Governor Viral Acharya and Executive Director Michael Patra. However, a final decision would be taken by Finance Minister Arun Jaitley on Wednesday, said an official. The reason being Principal Economic Advisor Sanjeev Sanyal is out of India on official work, and Economic Affairs Secretary Shaktikanta Das is retiring on Wednesday. Corporate Affairs Secretary Tapan Ray will take additional charge of the department of economics affairs (DEA).

Only Chief Economic Advisor Arvind Subramanian is currently available to hold these meetings, as there is uncertainty over whether Ray can be brought up to speed on the matter on his first day as the in-charge of the DEA. 

If it is decided to not have the meetings, the finance ministry’s views on interest rates will be sent to the MPC members in writing.

Rules state “that the government should be allowed to provide inputs to the monetary policy committee,” Subramanian had told Business Standard in an interview last week. “This group is just consistent with that. This setup is trying to give structure to government inputs to MPC. This three member-panel is doing that. Remember, these are inputs, we don’t pressurise them (MPC). They are free to take our views into consideration, or not. We will meet them before monetary policy meetings to present our opinions.”

Though the upcoming meeting might be “in limbo”, as the official said, subsequent meetings would be a regular occurrence. This group, and its meetings with the MPC members, will replace the earlier arrangement of the RBI governor coming to New Delhi to meet the finance minister and senior policymakers in North Block before monetary policy meetings.

The MPC has been catching everyone off guard since its inception late last year. Its first three policy resolutions were against broad market expectations, and a change in its stance to neutral from accommodative in February took everyone by surprise. In the previous meeting, the MPC adopted a rather hawkish stance, though retail inflation has been at a series low.