RBI, Finance Minister should resolve differences; come together in national interest: Panagariya

'While the RBI is legally less independent in India than the Federal Reserve in the United States, effectively it has enjoyed the same independence as the US regulator,' he said.

Published: 08th November 2018 07:51 PM  |   Last Updated: 08th November 2018 07:51 PM   |  A+A-

Former Niti Aayog vice chairman Arvind Panagariya. (Photo | PTI)

By PTI

NEW DELHI: Amid the ongoing tussle between the government and the RBI, former Niti Aayog vice chairman Arvind Panagariya has suggested that the two sides must eventually 'compromise' and 'come together in national interest'.

While the RBI is legally less independent in India than the Federal Reserve in the United States, effectively it has enjoyed the same independence as the US regulator, the noted economist said in an interview to PTI.

Observing that RBI and the government ought to work in close cooperation, he said, "Even when there are differences between the two sides, they must eventually compromise and come together in national interest".

Panagariya, who is currently a professor of Indian Political Economy at Columbia University, pointed out that even in the US, the government and the Federal Reserve sometimes work in close cooperation as had happened in the immediate aftermath of the 2008 global financial crisis.

He, however, noted that it was a pity that the media steadfastly magnified the differences rather than highlighting the common ground the two sides share.

The Finance Ministry and the Reserve Bank on several occasions in the past have witnessed divergence of views on key issues concerning interest rate, liquidity and management of the banking sector, but truce largely prevailed in the end.

This time around the conflict seems to have reached a flashpoint, with reports of government initiating consultations with the RBI under Section 7 of the RBI Act, which has never been invoked in the past.

The conflict between the Finance Ministry and RBI headed by Urjit Patel is on several issues, including relief to the power sector reeling under financial stress, handling of weak public sectors banks, addressing liquidity problems faced by the NBFC sector, and a proposal to set up a payment regulatory authority independent of the Reserve Bank.

The government has reportedly sent at least three letters on different issues under Section 7 of the RBI Act that gives it powers to issue any direction to the central bank governor on matters of public interest.

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

facebook twitter whatsapp