Maarg Manthan · Topic 17.13

Urjit R. Patel Committee on Monetary Policy Framework

Current Affairs & Government Schemes › Key Government Committees and Commissions · Topic 17.13

The Urjit R. Patel Committee, formally the Expert Committee to Revise and Strengthen the Monetary Policy Framework, was set up by the Reserve Bank of India in September 2013 under then Deputy Governor Urjit R. Patel and reported in January 2014. It recommended that the RBI adopt the new Consumer Price Index as the nominal anchor and move to flexible inflation targeting, with a path to 8 per cent by January 2015 and 6 per cent by January 2016, and a medium-term goal of 4 per cent with a band of plus or minus 2 per cent. The government legalised the framework in 2016 and renewed it in March 2026 for 2026-31.

6 min read · UPSC Prelims · Current Affairs & Government Schemes · Key Government Committees and Commissions

At a Glance

Set up September 2013, by RBI
Chair Urjit R. Patel, Deputy Governor
Report January 2014
Anchor CPI inflation
Medium-term goal 4 per cent, plus or minus 2
Exam link UPSC Prelims, Current Affairs and Government Schemes: Key Government Committees and Commissions

Where Does It Fit?

This is the last topic of the macro. It completes the series on older committees and gives the history behind the earlier topic on Reserve Bank of India committees. Previous topic: Y.H. Malegam Committee on Microfinance Institutions and NBFC Regulation. Next topic: Economic Survey of India (Annual).

How Did Indian Monetary Policy Frameworks Evolve?

Period	Framework and committee
1985 to 1998	Monetary targeting based on the Chakravarty Committee of 1985, which recommended flexible monetary targeting and price stability as an objective
1998 to 2011	Multiple indicator approach, under Governor Bimal Jalan, with a broad range of indicators such as interest rates, credit and exchange rates guiding policy
2011 to 2014	The RBI used the repo rate as the key policy rate, and inflation stayed high, with CPI inflation above 9 per cent in 2013
2014	The Urjit Patel Committee recommended flexible inflation targeting with CPI as the nominal anchor
2015	The government and the RBI signed the Monetary Policy Framework Agreement in February 2015
2016	The RBI Act was amended and the Monetary Policy Committee began work in October 2016, with the first target set at 4 per cent plus or minus 2 per cent

Nominal anchor: Use the new CPI, starting in 2012, as the headline measure, as it reflects the cost of living better than the Wholesale Price Index
Glide path: Bring inflation down to 8 per cent by January 2015 and 6 per cent by January 2016, and then aim at 4 per cent with a band of 2 per cent on either side
Policy rate: Make the repo rate the single policy rate, with a corridor and a term repo to manage liquidity
Committee form: Shift decisions to a Monetary Policy Committee with an external element, so that decisions are collective and not left to the Governor alone
Accountability: If the target is missed for a stated period, the RBI should explain the reasons and the way back
Fiscal link: Fiscal consolidation and a stable food policy support the framework, since food inflation weighs heavily in CPI
Statutory base: Section 45ZA of the RBI Act now empowers the Centre, in consultation with the RBI, to fix the target every five years
Failure rule: Three consecutive quarters of inflation outside the 2 to 6 per cent band is a failure of the framework

What Else Should You Remember?

Short name: The report is known as the Urjit R. Patel Committee report, and its full title refers to revising and strengthening the monetary policy framework
Current target: The target is 4 per cent for CPI Combined with a band of 2 to 6 per cent. As reported, the Finance Ministry notified in March 2026 that this continues for 1 April 2026 to 31 March 2031
First review: The first five-year review in 2021 kept the same target for 2021-26, even after the pandemic, and in 2020 the failure rule was suspended
MPC membership: Six members, the Governor as chair with a casting vote, the Deputy Governor in charge of monetary policy, one more RBI officer and three external members
Link to the Economic Survey: The Survey comments each year on inflation and the growth outlook, as in Economic Survey of India (Annual)
Criticism: Some economists argue that food and fuel shocks, which the RBI cannot control, should be excluded, and that growth gets too little weight
Defence: Supporters say that the framework has anchored expectations and brought average inflation down compared with the years before 2014
CPI series: The CPI series base is being revised, with a new base year series introduced in 2026, as reported, so the weights of the basket may change
Repo rate: The repo rate is the rate at which the RBI lends to banks, and it is the main tool of the MPC
Related committee: The earlier Bimal Jalan and Digital Lending panels belong to a different set of RBI committees, as in Reserve Bank of India Committees (Monetary Policy, Digital Lending, etc.)
Verification note: The numbers of current inflation change monthly, so the latest CPI release should be checked

Why Does It Matter for the Exam?

Chair and year: Urjit R. Patel, report in January 2014
Recommendation: CPI as anchor and flexible inflation targeting
Numbers: 8 per cent by 2015, 6 per cent by 2016, 4 per cent plus or minus 2
Legal base: Section 45ZA of the RBI Act, MPC from 2016
Common errors: Saying WPI is the anchor or that the MPC has five members

As an analytical point, inflation targeting works when the target is credible and supported by sound fiscal and food policies. Periodic reviews, as in 2021 and 2026, help balance price stability with the need for growth.

Why Is This Topic Important?

Committee Name and year
Numbers Target and band
Framework MPC and Section 45ZA

What Came Next?

The next macro covers important reports, indices and surveys, starting with the Economic Survey. Next topic: Economic Survey of India (Annual).

Key People and Terms

Nominal anchor Variable that guides expectations
Glide path Planned step down in a target
CPI Consumer Price Index
MPC Monetary Policy Committee
Repo rate Policy lending rate
Casting vote Tie-breaking vote

Exam Corner

Points to Remember

Report: January 2014.
Anchor: CPI.
Target: 4 per cent, band 2 to 6.
MPC from 2016, six members.
Renewed to 2031 as reported.

Do Not Confuse With

CPI and WPI Consumer prices versus wholesale prices
Chakravarty and Urjit Patel Committees Monetary targeting versus inflation targeting
MPC and RBI Board Rate decisions versus governance

Memory Hook

Chakravarty targeted money, Patel targets inflation, 4 plus or minus 2.

Mains Angle

Mains questions ask about the success of inflation targeting. These points give a balanced frame.

Gains Anchored expectations
Issues Food shocks, growth
Way Review and fiscal support

A Question You May Face

An original practice question, not a past paper question.

“Evaluate the shift of India to flexible inflation targeting following the Urjit Patel Committee and discuss the challenges.”

How to Answer

Shift From monetary to inflation target.
Design CPI, 4 plus or minus 2.
Issue Food shocks.
Way Review and coordination.

GS Relevance

Prelims: Patel Committee, inflation target and band, MPC, earlier committees. GS Paper 3: monetary policy, inflation, banking.

Frequently Asked Questions

What is the Urjit R. Patel Committee?

The Urjit R. Patel Committee was an RBI expert committee on revising and strengthening the monetary policy framework. Set up in September 2013 and reporting in January 2014, it recommended CPI as the nominal anchor and flexible inflation targeting with a 4 per cent medium-term goal and a band of plus or minus 2 per cent.

What did the Urjit Patel Committee recommend on inflation?

It recommended that inflation be brought down to 8 per cent by January 2015 and 6 per cent by January 2016, with a medium-term target of 4 per cent and a band of 2 per cent on either side. It also asked for a Monetary Policy Committee and the use of the repo rate as the policy rate.

What is India inflation target for 2026 to 2031?

The inflation target remains 4 per cent measured by CPI Combined, with a tolerance band of 2 to 6 per cent. As reported, the Finance Ministry notified in March 2026 that the framework continues for the five years from 1 April 2026 to 31 March 2031.

When was the Monetary Policy Committee formed?

The Monetary Policy Committee was constituted in 2016 after the RBI Act was amended and began its meetings in October 2016. It has six members, three from the RBI including the Governor, who has a casting vote, and three external members appointed by the central government.

Which committee came before the Urjit Patel Committee in monetary policy?

The Chakravarty Committee of 1985 came earlier and recommended flexible monetary targeting with price stability as a key aim. India followed monetary targeting until 1998, then a multiple indicator approach, before moving to flexible inflation targeting after the Urjit Patel report.

PYQ Practice — Statement Analysis

1 The Urjit Patel Committee recommended the Wholesale Price Index as the nominal anchor.

False

It recommended the Consumer Price Index.

2 The inflation target in India is 4 per cent with a band of plus or minus 2.

True

Renewed in March 2026 for 2026-31, as reported.

3 The Monetary Policy Committee was formed in 2016.