The Reserve Bank of India (RBI) has named a committee that will take a close look at its monetary policy framework. It is another sign that governor Raghuram Rajan will be pushing for a radical overhaul of the way the Indian central bank operates.
A fresh look at monetary policy is welcome. The last such comprehensive look was way back in 1985. It is also good that the rethink is being led by RBI rather than being imposed upon it by New Delhi. The Indian central bank has an unmatched understanding of monetary dynamics as well as of macro stability, which were underplayed or even rubbished by some recent government committees.
RBI has its fair share of critics who complain that its eclectic ways are a sophisticated form of intellectual confusion. Rajan has earlier batted for a focus on inflation control. Hopefully, the new committee, headed by deputy governor Urjit Patel, will go beyond the old debates to develop a refreshingly new framework for monetary policy in India.