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Reiterating that RBI’s autonomy is within the Act sends the message: ex-officials
The Finance Ministry’s statement on Wednesday regarding the Reserve Bank of India and its reiteration of the consultative process with the central bank is welcome. But the fact that it mentioned that the central bank was autonomous within the purview of the RBI Act is a message to the former that the government retains the right to issue directives to the RBI, say former Finance Ministry officials. “I think it is a mature and responsible statement,” a former Economic Affairs Secretary told The Hindu . “It is an effort to defuse the situation. The final line in the statement saying that the government will continue the process of consultation means that they want to defuse this situation.” “But that does not preclude them from issuing a directive on any issue if they feel strongly enough about it,” the official added. “The message to everyone, including the RBI, is that the central bank has autonomy within the Act, but the Act provides for a directive to be issued.” “This is a very positive move and it is very welcome that we are moving towards a consultative process,” former RBI Governor Bimal Jalan said. Another former Economic Affairs Secretary said that the government’s statement also served to exhort the RBI to work on the same page as the government on larger economic issues. “They are exhorting the RBI to be on the same page as the government regarding the larger economic issues, and in a way stating that RBI has not been on the same page in the recent past,” the official said. “On the other hand, they are saying they are independent under the RBI Act. They are saying ‘we are willing to make peace under the boundaries we have set for you’.” “We did not invoke Section 7 in 1991 or 1997 or 2008 or 2013. What is the need to invoke the provision now? It shows that government is hiding facts about the economy and is desperate,” former Finance Minister P. Chidambaram tweeted.
Source : https://www.thehindu.com/todays-paper/tp-business/statement-shows-govt-has-bigger-say/article25385042.ece
