{"id":34965,"date":"2018-10-31T14:33:53","date_gmt":"2018-10-31T09:03:53","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=34965"},"modified":"2018-10-31T14:33:53","modified_gmt":"2018-10-31T09:03:53","slug":"time-for-a-reserve-bank-of-india-dot-plot","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/time-for-a-reserve-bank-of-india-dot-plot\/","title":{"rendered":"Time for a Reserve Bank of India \u2018dot plot\u2019:\u00a0"},"content":{"rendered":"<p><a href=\"http:\/\/www.livemint.com\/Opinion\/QV29Hfltg2G8DZ63phpxRI\/Time-for-a-Reserve-Bank-of-India-dot-plot.html\"><span style=\"font-weight: 400;\">Time for a Reserve Bank of India \u2018dot plot\u2019<\/span><\/a><span style=\"font-weight: 400;\">:\u00a0<\/span><\/p>\n<p><b>Context:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For the smooth running of Monetary Policy Committee, dot plot is an useful tool.<\/span><\/li>\n<\/ul>\n<p><b>What is Monetary Policy Committee?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">On 22 September 2016, India\u2019s monetary policy framework took a significant step forward, with the formation of the monetary policy committee (MPC). <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The committee was created in 2016 to bring transparency and accountability in fixing India&#8217;s Monetary Policy.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It was expected that inflation forecasts and the accompanying commentary of the MPC would influence India\u2019s public discourse and improve general understanding of how the economy works. <\/span><\/li>\n<\/ul>\n<p><b>Why was the MPC created?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">First, a committee can represent different viewpoints.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> Second, spreading responsibility for the decision can reduce pressure that falls on an individual.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Third, a committee will ensure broad monetary policy continuity when any single member changes<\/span><\/li>\n<\/ul>\n<p><b>How has the MPC managed against these expectations? <\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The results have been good and encouraging so far. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The RBI has been consistent in its inflation-targeting narrative.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The MCP is expected to adhere to the inflation \u201cglide path\u201d which was formulated under the previous governor, signifying continuity.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The MPC\u2019s track record on transparency has been impressive.<\/span><\/li>\n<\/ul>\n<p><b>What are the drawbacks of MCP?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> There is room for improvement when it comes to forecasting.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">There is also a lack of transparency about forecasts of the key policy variable: interest rates.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Currently, the RBI\u2019s monetary policy stance is expressed in subjective terms as accommodative or neutral.<\/span><\/li>\n<\/ul>\n<p><b>What is its solution?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">An useful tool to solve its drawback is a \u201cdot plot\u201d; a plot which shows where each member thinks the policy rate would be at the end of the year for the next few years and in the longer run.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> The dots need not be identified with individual members, as is the case for the US Federal Reserve dot plot.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Dot plot gives a sense of future rate movements; it would be valued by markets, firms and households.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">It is amply clear that the MPC\u2019s journey so far has been exemplary.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Time for a Reserve Bank of India \u2018dot plot\u2019:\u00a0 Context: For the smooth running of Monetary Policy Committee, dot plot is an useful tool. What is Monetary Policy Committee? On 22 September 2016, India\u2019s monetary policy framework took a significant step forward, with the formation of the monetary policy committee (MPC). The committee was created&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/time-for-a-reserve-bank-of-india-dot-plot\/\">Continue reading <span class=\"screen-reader-text\">Time for a Reserve Bank of India \u2018dot plot\u2019:\u00a0<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-34965","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704817185},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34965","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=34965"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34965\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=34965"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=34965"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=34965"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}