India's Govt on backfoot over curtailing RBI chief’s power

Going on the backfoot over a draft Bill proposing curtailing powers of RBI Governor on interest rate, the Indian government on Monday said it is not right to conclude that it wants to curtail the central bank's powers.

At a hurriedly called press briefing, Finance Secretary Rajiv Mehrishi was at pains to explain whose draft proposal was it to withdraw RBI Governor's veto in the proposed monetary policy committee as he contradicted Chief Economic Advisor (CEA) to say it was not a proposal of FSLRC but went on to add that it was not even a government move.

"People of India own this draft report," he said, while seeking to put at rest the controversy generated by revised draft of the Indian Financial Code (IFC) that proposes to take away the veto power of RBI Governor in deciding the benchmark interest rate.

Observing that the government has not made up its mind on draft IFC, he said the government is seeking comments on it which indicates that it is still under discussion.

"This is still to be considered by the government as a discussion paper. So from that, to jump to a conclusion that some curtailment of the power of the RBI has been made or the government has decided to do so would be incorrect," he added.

He further said that the government's views on the IFC will be revealed when the draft bill is brought before Parliament for consideration and approval.

"Government's final mind will be revealed on the draft Bill which comes out before Parliament. This clarifies that there is no decision in government as of now," Mehrishi said.

Chief Economic Advisor Arvind Subramanian had earlier said that the revised IFC draft was based on FSLRC report, a position which was contradicted by FSLRC member M Govinda Rao.