Brokerage firm believes denial of extension to Gokarn shows lack of freedom for RBI Governor
The controversy surrounding the Deputy Governor’s appointment in Reserve Bank of India (RBI) is refusing to die down. It's the turn of a global brokerage to accuse the government of being revengeful against the central bank by not allowing an extension to Subir Gokarn despite RBI Governor D Subbarao's recommendation. In a note to its clients, broking firm CLSA’s Christopher Woods said that the finance ministry’s recent decision of not extending Gokarn’s tenure is a reminder of the current lack of independence of the central bank. “The decision is probably partial revenge for the RBI’s habit last year of regularly stating in its official policy statements that further monetary easing was conditional on meaningful fiscal tightening by the government,” Woods wrote. The broking firm also thinks the RBI Governor will not enjoy freedom in the remaining days of his term in office.“The current governor has now been reduced to a virtual lame duck since his own second term in office ends in September,.........
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CLSA is not alone in having the view that Gokarn was eased out by a ‘hurt’ finance ministry, as it could do no harm to RBI Governor directly. Business India(January 20, 2013) in its editorial ‘Muscling in’ has argued that it should be for the board of the Reserve Bank of India to pick its governors and not the finance ministry. The recent teasing behavior by GOI is a shame on the eminent statesmen(each one of them being a leader in their field) who are on RBI’s Central Board. The institution and Governor Dr Subbarao look unperturbed. Urjit Patel, the new Deputy Governor is not going to unsettle the extant RBI policy evolved over time. Still, one wonders what make the central board members cling on despite continuing insults by a ministry with tacit approval from the highest level. The only way GOI can make amends now is by ensuring a further term of 2 to 3 years for Dr Subbarao by deviating from the tradition and making provisions where necessary.
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