The document discusses the role and functions of the Monetary Policy Committee (MPC) in managing India's monetary policy, which aims for objectives like price stability, economic growth, and income distribution. It also highlights challenges the MPC faces, such as lack of communication and actual data, suggesting improvements like better public engagement and increasing member participation. Ultimately, the document emphasizes the importance of sound decision-making by the MPC for the nation's macroeconomic health.

1. MONETARY POLICY
REVIEW
COMMITTEE ROLE
PRITHVIRAJ YADAV

2. CONTENTS
Moneta
ry
policy
Monetary
policy
committe
e
Functions
of
monetary
policy
committe
e
Issue and
challenge
s facing
by
monetary
policy
committe
e
How to
solve
monet
ary
policy
issues
Conclusi
on
Reference
s

3. MONETARY
POLICY
Monetary policy is also known as RBI’s
money management policy. Because of
monetary policy is regulated under RBI’s ,
functions like as fix the interest rate,
quantity of money supply in economy, the
viability of money etc. These all activities
are doing by monetary policy. The main
objectives of the monetary policy is Price
stability, Exchange rate stability, Full
employment and Neutrality of money.

4. MONETARY POLICY COMMITTEE
REVIEW
Monetary policy committee is a group of people who decides the
monetary policy. It was started from 6 may 1997. In MPC there are
6(six) person involves, 3 from RBI (Governor of RBI, Deputy
Governor of RBI and 1 officer of RBI nominated by central board),
3 person members selected by government from different area like as
specialist in economic, Finance and Insurance. The MPC meets four
times a year to decide on monetary policy by a majority vote. And if
there’s a tie between the ‘Ayes’ and the ‘Nays’, the RBI governor gets
the deciding vote.

5. FUNCTION OF MONETARY POLICY
COMMITTEE
1. Rapid economic growth :-
It is the most important function of a MPC. The
MPC can influence economic growth by controlling real interest rate
and its resultant impact on the investment. If the RBI opts for a cheap
or easy credit policy by reducing interest rates, the investment level in
the economy can be encouraged. This increased investment can speed
up economic growth.
2 . Price Stability : All the economics suffer from inflation and deflation.
It can also be called as Price Instability. Both inflation and deflation are
harmful to the economy. Thus, the monetary policy having an objective
of price stability tries to keep the value of money stable. It helps in
reducing the income and wealth inequalities.

6. 3. Exchange Rate Stability :- Exchange rate is the price of a home
currency expressed in terms of any foreign currency. If this exchange rate
is very volatile leading to frequent ups and downs in the exchange rate, the
international community might lose confidence in our economy. The MPC
aims at maintaining the relative stability in the exchange rate.
4. Equal Income Distribution :- MPC fix special provisions for the neglect
supply such as agriculture, small-scale industries, village industries, etc.
and provide them with cheaper credit for longer term. This can prove fruitful
for these sectors to come up. Thus in recent period, monetary policy can
help in reducing economic inequalities among different sections of society.
5. Neutrality of Money :-The change in money supply creates monetary
disequilibrium. Thus monetary policy has to regulate the supply of money
and neutralize the effect of money expansion. However this objective of a
monetary policy is always criticized on the ground that if money supply is
kept constant then it would be difficult to attain price stability.

7. ISSUE AND
CHALLENG
ES FACING
BY MPC
1. Lack of communication :-
People are not aware about the
policies given by MPC, that how to consume and the
different interest rates of bank. Due to this so many
peoples are not able to get opportunity given by
government .
2. Lack of actual data :-
At the time of making decision by
MPC they have a survey data taken on the basis of
expectation, don’t have actual data so they make decision
on the basis of expectation, not on reality.
3. Lack of Knowledge :-
As we know there are only 6
members in MPC who makes decision of monetary policy
for 125 crore people of India. It can’t be sufficient for
taking good decision. All of them have different amount of
information.

8. 4. Lack of group Dynamic :-
MPC can take better decision than individuals. They
must not ignore the risk from groupthink. There can be a little use of if
everybody thinks alike or at least toes the official line.
5. Lack of ROBUST communication policy :-
There are also so many economist who have
good knowledge within the banking or organization who are not allowed to
participated in that, so that sometimes wrong decisions are also taken.

9. HOW TO SOLVE MPC
ISSUES
1. By communicating with people :-
Now a days peoples are surrounded by social media
like as Facebook, WhatsApp, Twitter, Instagram,
television and radio etc. By which they can
communicate easily and can share the opportunity of
government provided to them.2. By taking actual data :-
After communicated with the people they can get
better and actual data not the data of expectation. This can also do with
the help of psychologist and sociologist so their participant is also
important for MPC.
3. By increasing the number of member :-
If the number of people in MPC
increases then taking survey will be easy and there should be
more information which helps them to make better decision.

10. 4. By robust communication policy:-
When the meeting held on at that time
participating more specialist in that meeting can be beneficiary, take
ideas from them or hear their opinion then only making decision should
be better.

11. CONCLUSION
Monetary policy is playing a vital role in the macro economics of any
nation. So that it should be more focus on the demand and supply of
economic transactions. MPC should be take suggestion from different,
different specialist of economics, banking and insurance. And the most
important thing is that at the time of taking decision by MPC they should
think more seriously and have to make decision on the basis of reality
not on expectation. Because of their decision can GDP of nation can
grew upward and wrong decision can brings downward.