NEW DELHI: A day after the Reserve Bank of India revealed that it had barely 24 hours to prepeare for demonetisation of `500 and `1,000 currency notes, economists, especially former central bank governors, raised concerns on the eroding autonomy of the institution.
The debate took a curious turn on Wednesday with former Prime Minister Manmohan Singh attacking the disruptive economic policies of the Modi government, which, according to critics, have put the central bank in a spot. Terming the move as a disastrous, Manmohan Singh, who is also a former RBI Governor, said the worst is yet to come.
Earlier, Singh had said that the constant modification of rules post-demonetisation reflected poorly on the central bank.
His comments come days after two former RBI governors – Y V Reddy and Bimal Jalan – raised concerns about the banking regulator’s eroding powers in recent times. According to the former, RBI is facing a ‘reputational’ risk and its identity as an institution has been damaged with the government of the day treating it just like any other regulator while it has fundamentally different functions.
Batting for the central bank’s autonomy, Jalan said the government must respect this “very fundamental fact”. On Tuesday, noted economist Amartya Sen, too, raised questions on the central bank’s autonomy. On the decision to ban exchange of scrapped notes after December 30, he said: “I don’t think this is RBI’s decision. This must be the Prime Minister’s... I don’t think RBI decides anything at this time.”