MUMBAI:Thousand Moons Anniversary Harbinger of Calmer Relations?
On Reserve Bank of India’s 80th foundation day it was a convergence of sorts. Governor Raghuram Rajan spoke in Hindi of the institution’s Sathabishekam, Prime Minister Narendra Modi reciprocated that RBI, in its Sahastra-Chandra-Darshan year, was in perfect sync with the government.
“In our regular meetings Rajan explains so perfectly in just a few slides that I don’t have to make any special effort to understand or to ask any questions,’’ said Modi.
“Maybe it is because the thought process of the government and RBI are in perfect sync. As the representative of the government I express my satisfaction at the role that RBI is playing.”
Before him, Finance Minister Arun Jaitley set the tone, saying that since 1935 a very large part of India’s sovereign functions rests on the shoulders of RBI — management of monetary policy and inflation, rates, regulator of banking system, and management of public debt.
“We are proud of his performance,’’ said Jaitley. “We are trying to establish the credibility of Indian economy, and decision making process in the economy. We are trying to ease process and procedures, rationalize taxation process, and make some landmark changes in both direct and indirect tax system.”
Comments by Modi and Jaitley come at a time with RBI feeling uneasy on government’s insistence of moving public debt management role to an independent agency; redefining rules under Financial Sector Legislative Reforms Commission (FSLRC), plans to include more outside members in the monetary policy committee, and reportedly diluting Governor’s powers in key decisions.
In his inaugural speech, Rajan reminded that since the first Indian RBI governor C D Deshmukh, RBI has been blessed with a number of such great leaders, which is a reflection also of the process the government places in having a strong central bank.
“All understand the RBI’s role is to safeguard monetary and financial stability of the country even when working towards its financial development. There has always been a constructive dialogue between the government and the bank informed by the respective time horizons and attitudes towards risks,’’ said Rajan.
“History records that successive governments have appreciated the wisdom of RBI’s counsel.”
Rajan subtly reminded the government of RBI’s critical role in public debt management.
“RBI has fostered a liquid rupee government bond market that the government today is able to contemplate issuing 40-year bond,’’ said Rajan.
“The rupee is becoming international with foreign companies queuing up to issue rupee convertible bonds.”
Governor Rajan is internationally respected and global investors are unlikely to retain the same attraction for India with any weakening of the RBI Governor’s powers in favour of North Block.
While it may be too early to expect any reversal of the government’s proposals, the two sides clearly see merit in smoother functioning of the two as the Indian economy enters a crucial phase.
There is A lot of similarity between the thinking of RBI and the govt: Narendra Modi,The central bank’s professionalism has served the country well: Arun Jaitley,Nurture strong institutions like the central bank from outside: Raghuram Rajan