The new members -- Ram Singh, Director, Delhi School of Economics, Saugata Bhattacharya, economist and former Senior Vice President at Axis Bank, and Nagesh Kumar, Director and CEO, Institute for Studies in Industrial Development-- will replace Ashima Goyal, Jayanth R Varma and Shashanka Bhide. 

The tenure of the outgoing members ends on Friday, October 4.

The forthcoming MPC meet will be widely watched as it will take place barely a few weeks after the US Federal Reserve announced slashing of its policy interest rate.

The chorus for a cut in policy rate has become louder after India’s economic growth rate slowed to 6.7 per cent in the April to June quarter. In the corresponding period of the previous financial year, India’s growth rate had stood at 8.2 per cent. While in the January to March 2024 period, it was 7.8 per cent.

Though the RBI in its last MPC meet decided to leave the key policy rates unchanged at 6.5 per cent for the ninth consecutive time, the growing divergence in opinions among the six member MPC, headed by Shaktikanta Das, RBI Governor, had hit the headlines.

Banks usually take a cue from RBI's Repo or overnight lending rates to banks to fix their own lending rates to industry and consumers. 

The RBI MPC members had also reflected a split in their growth assessment.

“Early results of listed private manufacturing companies show sales and profits softened in Q1 FY25. Consumer confidence fell and the business expectations index has been moderating since Q4 FY24,” Ashima Goyal, MPC’s outgoing external member said at the last MPC meet.

Growth Vs Inflation

The Reserve Bank has always had to contend with its mandate of inflation targeting to keep a lid on prices, while juggling with interest rates in a bid to encourage growth. 

RBI Governor Shaktikanta Das earlier said that the central bank will look at long-term inflation projections rather than monthly data before taking any decision on interest rates.

Das also said that financial stability will also drive RBI's decision.

India’s annual inflation rate measured on consumer price index (CPI) rose to 3.65 per cent in August from 3.6 per cent in July -- the second lowest in the last five years and well below the RBI's target of 4 per cent.

According to data released by the Ministry of Statistics and Programme Implementation (MoSPI), corresponding inflation rates for rural and urban areas stood at 4.16 per cent and 3.14 per cent respectively. 

The external members of the MPC are named by the Government from the field of finance and economics.

The outgoing members, Varma is a professor at IIM Ahmedabad while Goyal is a professor at Indira Gandhi Institute of Development Research. Bhide is a senior advisor at Delhi-based National Council of Applied Economic Research.