RBI should be autonomous

The conflict between the government and the RBI is nothing new. But it does underline the tendency of successive governments to control over what is essentially the prerogative of the RBI. Earlier, it was then RBI governor D. Subbarao, who had differences with then finance minister P. Chidambaram over interest rates in the tussle between growth and inflation. Mr Chidambaram was so peeved that he made this stunning statement: “If the government has to walk the path of growth alone, it is prepared to do so.” Mr Subbarao’s predecessor, Dr Y.V. Reddy, also had differences with the then finance minister, that was light-heartedly described as more severe than the Indo-China war. The Centre also had its differences with RBI governor Raghuram Rajan.

Memories of these conflicts were rejuvenated when the Modi government last week proposed to bring the payments regulatory board under its control. Globally, central banks have been in charge of the payments system, and in India RBI was in control. The RBI has been doing a good job hitherto, so the finance minister should have explained as to why it is making this move. The Modi government has been accused of rendering most autonomous institutions toothless. This undermining of critical institutions and procedures must stop. Or in cases where deemed necessary, decisions must be explained and have a time-bound resolution.