How independent can a central bank head be?

How independent can a central bank head be?: Former Reserve Bank Governor YV Reddy pens his memories...


Online comments:
"Revelations made by Y V Reddy now and his successor Dr Subbarao last year explains the motives of political leadership in appointing FSLRC with a 'yours obediently' chairperson, which gave a report recommending breaking whatever remained of the backbone of RBI. The avatar of Dr Rajan on the scene retained India's central bank in one piece temporarily. Hopefully the generation of Urjit Patel and Viral Acharya will not delay dissent where appropriate, as they, like Dr Rajan can afford to be open while in service."
M G Warrier
RBI Autonomy: Final diagnosis

This refers to the piece “How independent can a central bank head be?” by G Naga Sridhar(Business Line, January 14). The revelations oozing out of Dr Y V Reddy’s “Na Gnapakalu”(My Memories) and the book “Who Moved My Interest Rate?” published last year by his successor Dr Duvvuri Subbarao together give the rationale for setting up of the Financial Sector Legislative Reforms Committee (FSLRC) with a ‘yours obediently’ chairperson, by the then political leadership.
The FSLRC chairperson proceeded with an assumed mandate to ‘truncate RBI to size’, with less emphasis on financial sector legislative reforms per se. The monologue report its chairperson wrote, brushing aside dissents from members and Dr Raghuram Rajan’s perseverance to minimize damage to the institution he presided over during 2013-16 have become history.
Dr Reddy has, in another interaction with media, said that he would have quit governorship, if GOI went against his advice in the matter of demonetization. In the absence of any evidence that RBI had opposed the move, observations like this coming from eminent veterans serve only to weaken the central bank further. Urjit Patel, who is fortunately healthy, has no option to get hospitalized on false grounds, either.
Now that three successive governors have been under political pressure to fall in line with GOI’s short-term perceptions about economic policy, the diagnosis is clear and pressure has to mount on GOI to restore RBI’s credibility and ability to perform the central bank’s mandated functions within the contours of the law of the land.
There is a concerted effort from vested interests to weaken RBI, by creating confusion about ownership (RBI’s capital belongs to GOI!), autonomy (An air of suspicion is created by giving an impression that RBI is seeking ‘functional and policy independence’ outside the legal framework, which is not the case) and comparison with functions of central banks elsewhere. Fact being, RBI’s role in India’s economic growth has evolved in the Indian context over decades, and the inseparability of alignment between monetary and fiscal policies as also the need for harmonious relationship between GOI and RBI was never under dispute till 1990’s. Once diagnosis is clear, cure is within the reach.
M G Warrier, Mumbai


Comments

Post a Comment

Popular posts from this blog

NAVAGRAHA STOTRAM

NAVAGRAHA STOTRAM* According to astrology, the positions of the nine planets in the twelve constellations of the zodiac and their movements are considered to be quite significant. The nine planets ‘Navagraha’ affect every aspect of human life. They play an important role in the activities, physical and mental health and life of any individual. The unfavorable positioning of any of these planets can be the cause of problems, bad health, and stagnation for many people. However, there is a solution to avoid the ill effects of the position and movement of the ‘Navagraha’ in our lives. Navagraha mantras (or stotram) are simple mantras which work as powerful healing tools to reduce the negative effects of any of the nine planets. These mantras are Hindu holy hymn addressing the nine planets. Benefits Of Navagraha Stotram And The Way to Practice The Navagraha Stotram is written b y Rishi Vyasa and is considered to be the peace mantra for the nine planets. They are powerful m
Read more

THE SUNSET OF THE CENTURY

*SUNSET OF THE CENTURY: Rabindranath Tagore THE LAST SUN OF THE CENTURY SETS AMIDST THE BLOOD-RED COLOURS OF THE WEST AND THE WHIRLWIND OF HATRED. THE NAKED PASSION OF SELF-LOVE OF NATIONS IN ITS DRUNKEN DELIRIUM OF GREED IS DANCING TO THE CLASH OF STEEL AND THE HOWLING VERSES OF VENGEANCE. THE HUNGRY SELF OF THE NATION SHALL BURST IN A VIOLENCE OF FURY FROM ITS OWNSHAMELESS FEEDING FOR IT HAS MADE THE WORLDITS FOOD, AND LICKING IT, CRUNCHING IT AND SWALLOWING IT IN BIG MORSELS, IT SWELLS AND SWELLS TILL IN THE MIDST OF ITS UNHOLY FEAST DESCENDS THE SUDDEN HEAVEN PIERCING ITS HEART OF GROSSNESS…   *Note: “The Sunset of the Century”, translated by the poet, from Naivedya; The English Writings of   Rabindranathtagore, Volume II,Delhi 1996, page 466. Quoted in his article ‘Critiquing nationalism’ by K Satchidanandan (Frontline, November 14, 2014). The article takes you to a much broader spectrum. HAPPY READING(READ MORE STAN
Read more

The King of Ragas: Sankarabharanam

                       The King of Ragas                      --------------------------     Long ago  serpents were put to lot of hardships.They  were afraid of other animals. They had to seek refuge in the hermitage of sage Saraba.The sage was a true devotee of Lord Shiva.He used to pray Shiva with melodious songs. As he sang a particular raga the snakes were much inspired and they began to dance,. Slowly the serpents became friendly with the sage. They brought water in their mouths for the pooja.They secreted  a special fluid in which the flowers got stuck to their bodies.The sage was much astonished by the service of the snakes.As the sarpas became very close to the sage ,they requested him to help having Darsan of Lord Siva. As requested by the sage Shiva appeared in the form of  a  Kapalika and stayed in the ashram.The music and dance of the snakes continued. The snakes rendered service to the kapalika as they considered him  a Shiva bhakta.Shiva was much pleased with t
Read more