Monetary and fiscal policies go together

Monetary and fiscal policies go together: An ‘independent’, inflation-targeting RBI, immune from accountability, is a bad idea. Yet we seem besotted by it


Several hurried and motivated steps taken by the political leadership in Delhi during the last 10 years or so have given an impression to the public that Finance Ministry and RBI are on a continuous fight to find out whether the central bank or the political leadership is stronger. In fact, since inception of RBI, the Indian central bank’s top management knew their boundaries and where differences of views had arisen, they were sorted out amicably. As Y V Reddy had said, ‘RBI has full autonomy, and I have FM’s permission to say this’.
The message being carried by some vested interests that RBI and GOI are not on one page, will do harm to the smooth management of both fiscal and monetary policies. RBI under Dr Rajan’s leadership and the present political leadership in Delhi are in continuous dialogue and hopefully, despite ‘targets’ and differences of views on ‘figures’, a cordial relationship between Mint Road and North Block is getting evolved.

M G Warrier, Mumbai


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