The Urjit Patel committee has submitted its 130 page report suggesting that inflation should be the nominal anchor as far as the policy framework is concerned. It recommends that the Reserve Bank of India (RBI) adopt a new CPI as the anchor for the policy.
It says that inflation target must be set at 4 percent plus or minus 2 percent and the inflation aim must be set in a frame of a two year horizon. It sees the need to reduce CPI inflation to 6 percent in 24 months and adds that RBI governor should be the chairman of the monetary policy committee.
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The panel also suggests that the government must bring down the fiscal gap down to 3 percent by FY17. Further, it says that administered setting of prices, wages and interest rate should be moved away from and everything should be market determined.
The panel recommended that monetary policy be set by a committee and should be comprised of Governor, Deputy Governor and two economists appointed by them. Each of these members would have one vote and the policy committee outcome should be decided by majority voting. It adds that the monetary committee should ordinarily meet once in two months.
Meanwhile, CNBC-TV18's Latha Venkatesh believes that these should not have any impact on the January 28 policy and therefore the market should not runaway with anything significant when it opens for trading on Wednesday.
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