Finance Minister P Chidambaram
wants the Reserve Bank to "walk in the same direction" as the
government by cutting interest rates in response to sweeping reforms to
rules governing foreign investment and politically-difficult cuts in
fuel subsidies. "In our view, the government and monetary
authority must point in the same direction and walk in the same
direction. As we take steps on the fiscal side, RBI
should take steps on the monetary side," Chidambaram, 67, said in his
first exclusive interview since returning to the finance ministry........
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1 comment:
FM’s observation that ‘RBI should MARCH in step with Govt together’, gives an impression that there is a dilution of understanding of monetary and fiscal management at the top level in India which no outside rating agency will help us to rectify. If GOI and RBI work in tandem, tapping the hidden potential in domestic resources including the estimated domestic stock of 18,000 tons of gold and all natural resources, bringing them to the mainstream accounting, ensuring international pricing while making estimates, the image of this country will drastically change. As repeatedly being hinted in monetary policy statements and sometimes in academic speeches by Dr Subbarao in the recent past, obviously due to coalition compulsions and external pressure, fiscal policy support has not been forthcoming to the expected level. This cannot be wished away by statements like this. Or, if the Govt expects RBI to behave in the way FM is suggesting, better consider amending RBI Act on those lines when the Govt is sure about a majority for passing such amendments.
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