Reserve Bank of India: Cure is within reach
Business Standard, January 16, 2017
Letters
Cure
is within reach
With reference to the report, “Reddy:
I would have resigned on demonetization” (January 14), the revelations made by
the former Reserve Bank of India (RBI) governor(Y V Reddy) in Na Gnapakalu (My Memories) and Duvvuri Subbarao in Who Moved My Interest Rate? together provide the rationale for
setting up of the Financial Sector Legislative Reforms Commission (FSLRC) with
a ‘yours obediently’ chairperson, by the political leadership of the day.
The FSLRC chairperson proceeded with
an assumed mandate to ‘cut the RBI to
size’, with less emphasis on financial sector legislative reforms per se.
The monologue report the chairperson wrote, brushing aside dissents from
members and Raghuram Rajan’s perseverance to minimize damage to the institution
he presided over during 2013-16 have become history.
Dr Reddy has said that he would have
quit RBI governor’s post if the government had gone against his advice n
demonetization. In the absence of any evidence that the RBI had opposed the
move, observations such as those like coming from veterans serve only to weaken
the central bank. Urjit Patel, the present governor who is fortunately healthy,
has no option but to get hospitalized on “false grounds”.
Now that three successive governors
in a row have been under pressure to fall in line with the government’s
short-term perceptions about economic policy, the diagnosis is clear. The pressure
has to increase on the government to
restore RBI’s credibility and ability to perform its mandated functions.
There seems to be concerted effort
from vested interests to weaken the RBI, by causing confusion about ownership,
autonomy and by comparing its functions with those of central banks in other countries.
The fact is that the RBI’s role in
economic growth has evolved in the Indian context over decades. The
inseparability of alignment between monetary and fiscal policies as also the
need for harmonious relationship between the government and the RBI were never
under dispute till the 1990’s. Once diagnosis is clear, cure is within reach.
M G Warrier,
Mumbai
Tail piece: Ex-Governors
can resign any number of times!
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