We have a ‘caged’ Monetary Policy. Top echelons in government, by habit, pre-empt any maneuverability available to RBI Governor, by explicitly stating the direction and extent of relaxation in monetary policy, well before the announcement. The Finance Minister, through supportive fiscal policy should prepare a fertile ground for monetary policy to fructify. Independent of fiscal policy, RBI will not be able to achieve any perceivable results. Last 20 months or so we have seen the helplessness of the central bank. It is time our political bosses started looking at grass-root level improvements in availability of basic necessities and comforts. To start with, perhaps, government can follow the example of present RBI Governor, who speaks out his problems and constraints in the open, explains what he can do and is doing, almost at monthly intervals and reviews and audits the progress made in the financial sector as a result of policy interventions on an ongoing basis. He also doesn’t mince words when it comes to the expectations of the central bank from those responsible for evolving and implementing fiscal policy. Though they are all material and significant in the context of the country’s positioning in the comity of nations, the improvement in the per capita availability of mobile phones or the 5000km reach of ‘Agni 5’ or Koodamkulam being one among the largest 10 nuclear power plants in the world won’t satisfy the aam aadmi, till he finds a satisfactory answer to his problems of hunger and basic necessities.
- M G WARRIER (ET)
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Consultation with the FM by the Governor before every Credit Policy announcement has become now open. It is obvious that the RBI would not be able to announce its policy with out the concurrence of the FM. Another disturbing trend in recent times is that the Secretaries in the Finance Ministry have started to openly say what the Governor should do in regard to interest rates. They cannot do this unless they are sure of the backing of the FM or eching the views of the FM. There are many other administrative areas too where the autonomy of the RBI has coem into serious doubt. Yet,it is continuing to be said by successive FMs that RBI is an autonomous institution!! We are a nation of hypocrites!
A.Chandramouliswaran.
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