Monetary Policy Committee

Background and evolution

The design borrowed from other inflation-targeting central banks, such as the Bank of England's Monetary Policy Committee, which also includes external members and publishes votes. Countries such as New Zealand, Canada, the UK and Brazil adopted inflation targeting earlier, and India's choice reflected a global consensus that clear targets and independent committees help control inflation.

Before 2016, the RBI Governor decided interest rates, advised by a technical committee whose views were not binding. India's inflation in the late 2000s and early 2010s was persistently high, often near or above 10%, and critics argued that monetary policy lacked a clear anchor. The Urjit Patel Committee in 2014 recommended flexible inflation targeting with CPI as the nominal anchor and a committee-based decision process.

In 2015 the government and RBI signed a Monetary Policy Framework Agreement, and in 2016 Parliament amended the RBI Act to create the MPC and require the government to set an inflation target every five years in consultation with the RBI. This page focuses on the MPC as an institution: how it is composed, how it votes and communicates, and how it is held accountable, while inflation targeting theory is covered in the linked lesson.