 "There will be no tug of war in the MPC: Ravindra Dholakia")
Renowned economist and a faculty member at the Indian Institute of Management, Ahmedabad (IIM-A), Ravindra Dholakia, has been named as one of the three government appointees to the newly formed Monetary Policy Committee (MPC). Dholakia was earlier a member of the Sixth Central Pay Commission, public expenditure management panel, and the Gujarat government's state public finance reforms committee. Ahead of the October 4 monetary policy meeting, he told Vinay Umarji that all the committee members are independent.
You had written a paper where you mentioned that inflation-targeting will have a cost in the short term as well as the long term. But the Reserve Bank of India (RBI) has maintained that even if there is a short-term cost of inflation targeting, in the long run it is beneficial. Your comments?
I have not withdrawn my paper. It is still there on the IIM-A website. That proves that I still stand by my views.
The monetary policy announcement is on October 4. Accordingly, we will be meeting to ensure that reasonably clear policies come out by then. The October 4 monetary policy will be decided under the MPC. I cannot say anything on whether or not the minutes will be made public. This is for the first time that such a committee has been set up. Hence, there are many things that are yet to be sorted out. A clearer picture will emerge only later.
The MPC is equally divided between members from the government and RBI, while the central bank governor has a casting vote. Technically, even if three of the external members disagree, RBI has the deciding voice. How would you assert your viewpoint in the committee?
Whenever such committees are appointed, the whole idea is that they are going to be independent. Even if they are from RBI, they are supposed to have independent views. It is not necessary that just because there are RBI representatives, they will only take RBI's view in the committee. Theoretically, if there is a tie, the casting vote has to be with the committee chairman, which, in this case, happens to be the RBI governor. By virtue of him heading the whole organisation, it is obvious that the RBI governor would get a casting vote. Every democracy has this.
You will be seen as a government appointee, who would be expected to look at the interests of the government. Do you agree?
No. We are considered independent members. The government has appointed us as independent members. There is no tug of war.
You have worked with the government earlier, in different committees. Given your experience, what is the kind of value addition are you looking forward to making at the MPC meetings?
I was a member of the Sixth Pay Commission, and not a single issue ever got leaked from the committee. In fact, people kept on guessing but there was no input from anyone of us. This is the experience that I bring (to the MPC).
You had written a paper where you mentioned that inflation-targeting will have a cost in the short term as well as the long term. But the Reserve Bank of India (RBI) has maintained that even if there is a short-term cost of inflation targeting, in the long run it is beneficial. Your comments?
I have not withdrawn my paper. It is still there on the IIM-A website. That proves that I still stand by my views.
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Will the minutes of MPC be made public with names and opinion of the members?
The monetary policy announcement is on October 4. Accordingly, we will be meeting to ensure that reasonably clear policies come out by then. The October 4 monetary policy will be decided under the MPC. I cannot say anything on whether or not the minutes will be made public. This is for the first time that such a committee has been set up. Hence, there are many things that are yet to be sorted out. A clearer picture will emerge only later.
The MPC is equally divided between members from the government and RBI, while the central bank governor has a casting vote. Technically, even if three of the external members disagree, RBI has the deciding voice. How would you assert your viewpoint in the committee?
Whenever such committees are appointed, the whole idea is that they are going to be independent. Even if they are from RBI, they are supposed to have independent views. It is not necessary that just because there are RBI representatives, they will only take RBI's view in the committee. Theoretically, if there is a tie, the casting vote has to be with the committee chairman, which, in this case, happens to be the RBI governor. By virtue of him heading the whole organisation, it is obvious that the RBI governor would get a casting vote. Every democracy has this.
You will be seen as a government appointee, who would be expected to look at the interests of the government. Do you agree?
No. We are considered independent members. The government has appointed us as independent members. There is no tug of war.
You have worked with the government earlier, in different committees. Given your experience, what is the kind of value addition are you looking forward to making at the MPC meetings?
I was a member of the Sixth Pay Commission, and not a single issue ever got leaked from the committee. In fact, people kept on guessing but there was no input from anyone of us. This is the experience that I bring (to the MPC).