Garg takes a jibe at Acharya’s comments
NEW DELHI: In an apparent dig at Reserve Bank of India (RBI) deputy governor Viral Acharya’s ‘wrath of financial markets’ comment, economic affairs secretary Subhash Chandra Garg on Friday said vital economic indicators are showing improvement, including rupee trading below 73 to a dollar.
Acharya, in his much talked about speech last week, had raised the issue of autonomy of central bank and undermining the central bank’s independence could be “potentially catastrophic”.
“Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution; their wiser counterparts who invest in central bank independence will enjoy lower costs of bor- rowing, the love of international investors, and longer life spans,” Acharya had said.
The deputy governor’s commenthadgeneratedcontroversy, hinting at the growing rift between the government and the central bank.
Taking to twitter Friday, Garg took a jibe at Acharya’s comment wondering whether improvements in macro economic parameters can be termed as ‘wrath of markets’.
“Rupee trading at less than 73 to a dollar, Brent crude below $73 a barrel, markets up by over 4% during the week and bond yields below 7.8%. Wrath of the markets?,” Garg tweeted. At the interbank foreign exchange (Forex) market, rupee was trading at 72.50 per US dollar at 1600 hours.
Earlier this week, finance ministry had issued a statement saying that the autonomy for the central bank, within the framework of the RBI Act, is an “essential and accepted governance requirement”. However, it added that “both the government and the central bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy”.
The government, according to people aware of the matter, has sent at least three letters to the central bank on different issues under Section 7 of the RBI Act that gives it powers to issue any direction to the apex bank governor on matters of public interest. The government had never used Section 7 in the 83-year old history of the Reserve Bank.