How can the central bank governor deliver appropriate monetary policy when he can't even get the deputy he wants
...............The RBI is not legally independent, but selective independence is often conveyed by the personalities of the governor and his deputy governors. Perhaps Mr Gokarn became the fall guy for resisting calls for interest rate cuts by the government and industry lobby groups, despite uncomfortably high inflationand/or for the handling of the rupee. Under him, monetary policy guidance explicitly – correctly, in my view – identified the pressing need for fiscal correction to regain macro stability and to contain inflation. The irony of his unfair fall is that the government, struggling for credibility and whose actions limited the degree of freedom of the RBI in dealing with massive rupee depreciation and stubbornly high inflation, decided who should pay the price...............
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Future historians of RBI and perhaps Indian Economy would do well to keep a clipping of this article. Several observations here, like, ‘ A common fixture through the various gaps is a government with its head in the sand’, ‘Perhaps Mr. Gokarn became the fall guy for resisting calls for interest rate cuts by the government and industry lobby groups, despite uncomfortably high inflation and/or for the handling of the rupee’, and ‘There will be a new RBI Governor in September, and (hopefully) by next year we will have a new government that is, finally, for the people and for the good of the people’ are all comments worth preserving for posterity.
Without dampening the underlying hope in the change 2014 may bring, one is tempted to ask whether this sort of blatant arrogance on the part of those in charge of governance, even if it was prompted by survival instinct, was called for, in handling financial sector and through that the fate of economic development of the country, during the last couple of years. The UPA II leadership and the central government (represented through the central ministers) were selective in showing any respect for institutions like RBI and CAG, which, on their part, have a tradition of upholding constitutional mandate.
But, a deeper look at the larger agenda on hand with the Centre, major part of which it expects to execute during the year 2013, will reveal that the abnormalities covered in this article are just symptoms of a chronic malice that is troubling governance at the top. Still, how, where and when the undeclared war that North Block is fighting with Mint Road, in an effort to clip dissent ends, will be decisive in the development of Indian Economy. If the Approach Paper notified by the Financial Sector Legislative Reforms Commission is any indication, economists, statesmen and stakeholders in India Growth Story should raise their voice against the ongoing efforts to stifle institutions.
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