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RBI to target inflation to 6% by January next

As per the monetary policy framework agreement between Finance Ministry and RBI, the monetary policy will now target inflation to be 6% by January 2016


The Finance Ministry and the Reserve Bank of India (RBI) have agreed to inflation rate targeting under which the apex bank will aim to lower retail inflation to 6% by January 2016 and further to around 4% by March next year.
The monetary policy framework agreement as signed on 20th February is to "primarily maintain price stability while keeping in mind the objective of growth".
"The Reserve Bank will aim to bring inflation below 6% by January 2016. The target of financial year 2016-17 and all subsequent years shall be 4% with a band of (+/-) 2%," the agreement said.
While the agreement gives a free hand to the RBI Governor to decide on the monetary policy measures to achieve the inflation target, it also requires the RBI to give out to the Central Government a report in case the target is missed for a period of time.
The RBI is also required to make public every six months a document explaining the sources of inflation and the inflation forecast for the period between six-eight months.
In the Budget, Finance Minister Arun Jaitley had said a monetary policy framework would be put in place to keep inflation below 6%.
"To ensure that our victory over inflation is institutionalised and hence continues, we have concluded a monetary policy framework agreement with the Reserve Bank of India. The framework objective is to keep inflation below 6% and we will move to amend the RBI Act this year and provide for monetary policy committee," he had said.
Retail inflation in January stood at 5.11%.



MG Warrier

2 years ago

This move will infuse transparency in the thought process of policy makers. At this stage of economic development, when analysts and economists dissect and find reasons or attribute motives for every utterance by the Finance Minister or RBI Governor, such transparency will give some relief and make debates more focussed.
Having said that, it would be too soon to expect Monetary Policy to have inflation targeting as its sole or primary objective. In the Indian context, unlike other central banks, for historic reasons, RBI has taken on itself several responsibilities in relation to economic development. It will take time to put in place systems/institutions to take over all of them.
Let us not worry too much about responsibility and accountability of either finance ministry or RBI. This is an issue which can be debated along with improvement in approach to governance.
Like Railway Time Table tells you about late running of trains, Inflation Target will tell you what was the aim of the policy makers at a given time. Aberrations will be explained from time to time.
M G Warrier, Thiruvananthapuram

FMC modifies KYC registration process for complying with SEBI

FMC will have the same KYC document for commodity derivatives market as prescribed by SEBI for securities market


There will now be a common know your customer (KYC) process for both commodity and stock markets. Commodities regulator Forward Markets Commission (FMC) has modified its norms to make it easier for clients to register for trading in these two financial markets.
On Saturday, Finance Minister Arun Jaitley announced that the FMC would be merged with capital market regulator Securities and Exchange Board of India (SEBI); the latter will now oversee both equity and commodities markets. 
"The Commission has decided that KYC document of the commodity derivatives market will be identical to that prescribed by the SEBI for the securities market," commodity markets regulator FMC said in a circular to all national commodity bourses.
This is being done to enable uniform KYC registration process in the two financial markets to make it easier for clients to register for trading and to avoid duplication of paper work with various intermediaries, it said.
According to the FMC, the modified KYC documents would comprise of a KYC form for 'individuals only ' and another 'non-individuals only' as prescribed by SEBI.
The other documents include uniform risk disclosure document along with rights and obligations of members, authorised persons and clients as well as do's and don'ts for the clients, it said, adding that these three documents will remained unchanged.
The commodity bourses have been asked to bring the provisions of this circular to the notice of their members and also disseminate the same through their website.
The exchanges have been asked to make amendments to the relevant bye-laws, rules and regulations for the implementation of the modified KYC norms.
Currently, there are four national and six regional commodity bourses operating in the country.


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