RBI's accountability to GOI : Dr Bimal Jalan's views
January 11, 2019
Is Jalan telling the obvious?
Former RBI Governor Dr Bimal Jalan who is now chairing the Economic Capital Framework Panel appointed by the Reserve Bank of India (RBI) has reportedly said in an interview given to Reuters that “The RBI is accountable to the government for executing the kind of monetary policy that has been announced,” Media can rope in the most cautious celebrities also into avoidable controversies.
After the Monetary Policy Committee (MPC) came into being, RBI announces the monetary policy based on the majority view taken by the MPC after due deliberations at its meetings spread over 2 to 3 days once in every two months. MPC which has statutory backing has three members including Governor from RBI and three experts nominated by GOI. In such committees, once constituted, members apply their independent minds in deliberations and decisions are taken in public interest. A practice different from legislatures where political parties can use a whip. Governor who chairs MPC has a casting vote, not to give RBI any specific advantage, but keeping in view the chances for a tie because of the even number (6) membership. In a way, all members of MPC are GOI nominees as Governor and his deputies are appointed by GOI. In the circumstances how the thought of RBI going back on monetary policy announced by it (to invoke accountability) came to Dr Jalan’s mind is intriguing. As confusing also as the media debate about invoking Section 7 of RBI Act by GOI which subsided without much ado after Dr Urjit Patel's resignation on December 10, 2018. May be, some clarity may emerge in the coming days!
M G Warrier, Mumbai