India’s Government Likely to Clash with RBI Over Rates

Having agreed this week to formally adopt inflation targeting as a guiding star for monetary policy, India’s government and central bank remain at odds over how crucial decisions are made.

Both sides support the setting up of a Monetary Policy Committee, as first officially proposed in 2014 when a different government was in power, and Reserve Bank of India Governor Raghuram Rajan was just four months into the job.

But, say officials with knowledge of the various proposals, the two sides disagree over everything else — the size of the committee, its composition and whether the central bank chief would have the final say, in the form of a veto.


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