9. Recent Policy Measures to control inflation

Government has institutionalized a commitment to low inflation in the new monetary policy framework agreement. As per revised monetary policy framework, the Government fixes inflation target in consultation with the Reserve Bank. Now the monetary policy is managed by the Monetary Policy Committee (MPC), headed by the RBI Governor, as provided in the amended Reserve Bank of India Act, 1934.

As per the revised monetary policy framework, the Government has fixed the inflation target of 4 per cent with tolerance level of +/- 2 per cent for the period beginning from August 5, 2016 to March 31, 2021.

The Monetary Policy Committee is entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level. Here the targeted inflation is CPI. As per the provisions of the RBI Act, out of the six Members of Monetary Policy Committee, three Members will be from the RBI and the other three Members of MPC will be appointed by the Central Government.