Monetary Policy Committee as an Important Tool of RBI

Success or failure of the economy is based on two important policy frameworks for a country like monetary policy and fiscal policy. Monetary policy is maintained by RBI while fiscal policy is maintained by Government of India. Monetary policy plays very important role for the stability of the monetary base of the economy as whole. There are various purposes of monetary policy for which it actually functions like price stability, employment generation, increasing production, economic growth and development etc. Traditionally monetary policy was mean to maintain price stability only but with the growing economic development other objectives were set for the monetary policy. But recently since 2014, government and RBI had determined the sole purpose of monetary policy that is price stability in the economy as a whole. For this purpose monetary policy committee is constituted for the effective functioning of RBI’s monetary policy and keep price stability at a desired level of the economic need.