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India’s Problem Solving By Committee: Interest Rate

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Editor’s remarks:

The Indian government chose earlier this summer to move the interest rate decision from the hands of solely the Reserve Bank’s Governor. Today’s interest rate decision will be coming from the new Monetary Policy Committee which comprises of the RBI governor, two RBI members and three other committee selected persons. The record low rate of 6.5% is expected to remain the same but since the new MPC will be focusing on inflation targets, lower interest rates will probably be here for the long term. The new RBI governor is yet to be selected but the former deputy, Subir Gokarn, seems to be the odds-on favourite. If so, Subir will no longer feel the sole pressure of selecting the rate but if a tie occurs among the six committee members, his say will decide. While maybe not be so public in the future, as long as the RBI has the deciding say, expect disputes to continue.

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