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Experts expect RBI to raise rates by 0.25% in October policy
खबर में क्यों?
Who sets India's repo rate? The six-member MPC structure GS3 Economy keeps testing
Inflation and crude prices push expectations of a rate hike.
Why it matters: asked in UPSC 2022; factual, Prelims-type
What you need to know
2 मिनट
An experts' poll expects the Reserve Bank of India to raise its policy rate by 0.25 percentage points at the October policy meeting, citing inflationary pressures, crude oil prices and global interest rates.
The rate is decided by the six-member Monetary Policy Committee, with Governor Sanjay Malhotra as chair.
स्रोत: Topper IAS editorial (PIB / The Hindu / Indian Express)
मुख्य तथ्य
Remember these
- An experts' poll expects the RBI to raise its policy rate by 0.25 percentage points at the October policy meeting
- Drivers cited: inflationary pressures, crude oil prices and global interest rates
- The policy rate is decided by the six-member Monetary Policy Committee (MPC)
- Governor Sanjay Malhotra chairs the MPC
- The MPC was given statutory status under the RBI Act, 1934 (amended in 2016); the Governor has a casting vote only in a tie
प्रीलिम्स · मेन्स
How the exam will ask it
प्रीलिम्स
- The Monetary Policy Committee has six members: three from the RBI (including the Governor as chair) and three external members appointed by the Central Government.
- The MPC decides the policy repo rate, the rate at which the RBI lends short-term funds to banks, to meet the inflation target.
- Higher crude oil prices push up imported inflation, which can lead the central bank to raise the repo rate.
मेन्स
GS3 Economy: Monetary policy. Imported inflation from crude oil and tighter global rates strain price stability, and the MPC under the RBI Act, 1934 responds by adjusting the repo rate within the flexible inflation-targeting framework. A hike curbs inflation but can slow credit and growth, so the way forward is calibrated tightening, supply-side measures on food and fuel, and clear communication.
PYQ connection
A question UPSC has already asked on this
With reference to the Indian economy, consider the following statements:
- If the inflation is too high Reserve Bank of India (RBI) is likely to buy government securities.
- If the rupee is rapidly depreciating RBI is likely to sell dollars in the market.
- If interest rates in the USA or European Union were to fall that is likely to induce RBI to buy dollars.
Which of the statements given above are correct?
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
उत्तर देखें
उत्तर: B
Why this matters: today's issue is directly connected to a concept UPSC has already tested. Read the story with this question in mind.
Practise this PYQ →Quick recall
Answer before you reveal
The Monetary Policy Committee that decides India's policy repo rate under the RBI Act, 1934 has how many members?
- 5
- 8
- 7
- 6
उत्तर देखें
उत्तर: D — Correct: 6 — The committee has six members: the Governor, a Deputy Governor, one more RBI officer and three external members appointed by the Centre. • 5 — wrong: Five is not the strength of the committee; the Act provides for a six-member body. • 8 — wrong: Eight is too many; the Act provides for six members, three from the RBI and three external members. • 7 — wrong: Seven is not the strength; the Act provides for six members, with the Governor having a casting vote only in a tie.
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