Business Standard, June 14, 2016

Caging the RBI

With reference to “A reset in policy” by A K Bhattacharya (Business Standard, Raisina Hill, June 13) the concern aired in the conclusion, “But a reset in equations gives rise to many difficult situations and spawns controversies” can become real, only if the central government confronts the Reserve Bank of India(RBI) within the latter’s mandated territory of administering monetary policy. It has to be said to the credit of government of India (period 1935 to India’s independence included) that the RBI has been all through manned by competent top management and it’s views were respected by successive governments in New Delhi.
In all these years, politics of the ruling parties or the personal biases of the RBI Governor and his deputies did not, by and large, affect the smooth functioning of the central bank. The game of numbers on the representation on the Monetary Policy Committee (MPC) was an aberration which can be traced back to the partisan Financial Sector Legislative Reforms Commission report, which was a product of circumstances, with a built-in effort to “cage” the RBI. That report will remain only a reference document and as has happened in the case of inflation targeting and constitution of MPC, in future also, decisions on recommendations will be, hopefully, issue-based and taken only after due deliberations and consultations.
In a larger sense, all members of the MPC will be expert professionals in their own fields and will be pursuing national interest rather than breaking into sub-groups within the committee and fighting for Centre or RBI.

M G Warrier, Mumbai


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