Policy Coordination — Policy Reforms

Entry	Year	Description	Impact
Finance Act, 2016	2016	Introduced Section 45ZB to the RBI Act, 1934, establishing the Monetary Policy Committee (MPC) and formalizing the inflation targeting framework. It also amended Section 45ZA to define the inflation target setting process.	Revolutionized monetary policy by shifting from a Governor-centric model to a committee-based approach with a clear mandate for price stability. This institutionalized a key mechanism for policy coordination by making the inflation target a shared objective between the government and the RBI.
FRBM Act, 2003 (various amendments and subsequent review)	2003 (and subsequent years)	The original FRBM Act set targets for fiscal deficit, revenue deficit, and public debt. Subsequent amendments and the recommendations of the N.K. Singh Committee (FRBM Review Committee, 2016) proposed a debt-to-GDP ratio target and a glide path for fiscal consolidation.	Aimed to instill fiscal discipline and provide a predictable fiscal environment. By constraining government borrowing, it reduces the likelihood of fiscal dominance, thereby creating more space and effectiveness for independent monetary policy, enhancing overall policy coordination.