Urjit Patel Committee

In January 2014, RBI appointed an expert committee headed by Urjit Patel, the current Governor of RBI to examine the existing monetary policy framework. The committee made several far reaching recommendations, some of which have been discussed below.

♤ The most important recommendation of the committee was that the RBI should focus on controlling inflation in the economy or in other words inflation should be the nominal anchor to frame monetary policy.

♤ The nominal anchor or the target for inflation should be set at 4 per cent with a band of +/- 2 per cent around it.

♤ The nominal anchor should be defined in terms of headline CPI inflation, which closely reflects the cost of living and influences inflation expectations relative to other available metrics. Historically, Indian policymakers have relied on the wholesale price index

♤ It recommended a 12-month target of 8 per cent and 24-month target of 6 per cent, before the inflation target is formally adopted.

♤ The committee asked the Central Government to ensure that the fiscal deficit as a ratio to GDP (gross domestic product) is brought down to 3.0 per cent by 2016-17.

♤ The Patel panel felt that the monetary policy decision-making should be vested with a