Letters: RBI and GOI | Business Standard

Lettes: RBI and GOI | Business Standard

Submitted version:

This refers to the report “Jalan wants flexible policy-making, better govt-central bank ties” (April 15). If an ex-RBI Governor of Bimal Jalan’s stature, who is still closely associated with policy formulation in government and financial sector says, “…The utmost importance should be put on cohesion and coordination between policy makers in critical spheres”, it doesn’t need super-intelligence to infer that the observation comes in the context of the goings on in relation to the recent frictions between the political leadership in New Delhi and the Reserve Bank of India.
As Dr Jalan and a few more Ex-RBI Governors who are part of or very close to the power centres in New Delhi know, RBI has always gone more than half way to accommodate GOI perceptions. Inadequate reciprocity from the other side and policy compulsions emanating from some of the roles not commonly handled by other central banks assigned to RBI, sometimes brought embarrassments to RBI Governor in public eye.
As rightly observed by Dr Jalan, there is no escape for GOI and RBI from working in cohesion with broad national priorities in view. And here, solution does not lie in shifting public debt management from RBI to finance ministry or GOI fixing targets for management of inflation by RBI. In the Indian context, Finance Ministry and the central bank have a relationship which has to be nurtured and maintained without affecting harmony, even when difference of views may arise, as in the past.
M G Warrier, Thiruvananthapuram 



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