A good decision not to lower rates

A good decision not to lower rates: However, the operating procedure for monetary policy needs to be reviewed...

A balanced view

This refers to Usha Thorat’s article “A good decision not to lower rates” (Business Line, June 8). This is one of the few balanced analyses to appear in the print media on yesterday’s monetary policy announcement. Reading in Business Line one’s thought wanders to the days when S S Tarapore’s “Maverick View” used to appear in this paper. Reason being the restraint observed in Thorat’s observations and the care taken not to be controversial both of which would have been absent if Tarapore had been commenting on the same subject.

The relationship issues between Government of India(GOI) and Reserve Bank of India(RBI) have become a matter of derisive public debate in recent years. Even books like “Dialogue of the Deaf” making serious fun of the endangered marriage between fiscal and monetary policies are being sold like hot (though stale in content) cakes.

It is discomforting to see that Finance Ministry brought avoidable embarrassment to itself by inviting Monetary Policy Committee for a pre-policy tutoring which invite, MPC politely declined. Whosoever masterminded this grand idea, did not do a service to the country. Compare this crude way of interfering with the functioning of a professional body constituted for performance of a defined role in policy making with the elegance of the convention of pre-budget and pre-Monetary Policy Announcement meetings between Finance Minister and RBI Governor.

During the Raghuram Rajan Era in RBI, there was an induced restraint in finance ministry and among politicians who were ministers while trying to make pre-emptive observations preceding every monetary policy statement which Dr Subbarao endured with pain. Now, taking advantage of Dr Urjit Patel’s refusal to interact with media as frequently as Dr Rajan did, efforts are being made by both bureaucracy and political leadership in Delhi to discipline RBI. The response from the professional body that the MPC is, should be seen in this perspective.

Having said that, the marriage between fiscal and monetary policies has no built-in divorce option. It is not a living together relationship. It will be in the best interest of the nation for  Delhi to avoid a confrontational approach to RBI, so long as there are no apparent signs of RBI or MPC compromising professionalism for extraneous reasons.

M G Warrier, Thiruvananthapuram


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