New Delhi: On Friday, the Indian government
formally implemented its central inflation target of four per cent, an
important confirmation of the inflation-fighting policies championed by Reserve
Bank of India (RBI) Governor Raghuram Rajan, who steps down next month.
Junior finance minister Arjun Ram Meghwal
tabled a notification in parliament’s upper house that confirmed the target at
4 per cent, plus or minus 2 per cent, in line with the goal the government
originally agreed with Dr Rajan.
Candidates are also being shortlisted for the
six-member monetary policy committee (MPC), a senior government official said
earlier, but the panel was unlikely to be formed in time for next Tuesday's RBI
policy meeting.
“All
I can say is that we are currently shortlisting candidates (for the MPC). And
it won't get formed before the August 9 policy,” the official told Reuters,
requesting anonymity, adding it may be in place in time for Rajan’s departure.
Dr
Rajan, a former International Monetary Fund chief economist highly regarded by
financial markets, will step down on September 4 after three years at the helm
of the RBI during which his policies helped to cut inflation in half.
He
dropped a bombshell in June by announcing he would not seek a second term, but
has sought to cement his legacy by completing the shift to formal inflation
targeting and staffing up the six-member MPC before he steps down.
Some
senior economists, including Dr Rajan’s predecessor at the RBI Duvvuri
Subbarao, have urged India not to fixate on an inflation target given the need
to ensure growth and financial stability.
Intense
speculation persists over the identity of Rajan’s successor. Although the field
has narrowed, officials in Prime Minister Narendra Modi’s office have not
confirmed whether any announcement is imminent.
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