Monday, July 12, 2010

Is the idea of independent RBI is anathema?

Well, in my view ‘yes’ and ‘no’ given the situation of an economy is undergoing and the kind of pundit’s arguments.

Consider. One of our great monetary economists in India Dr. C. Rangarajan who upheld (in the first para below) his views expressed for so many decades. And the second para below is fair enough but who listen in the government even for this high profile words?

Coomi Kapoor: Who should call the shots on monetary policy, the Finance Minister or the RBI?

Ultimately, it is the RBI which should do it. There is always considerable amount of discussion between the RBI and the government because the government is also responsible for the decisions taken by the central bank. I do not think the RBI would announce some decision to which the government is totally opposed. It is the responsibility of every wing of the government to ensure that the inflation rate is kept low, growth is enhanced and financial stability is maintained.

Subhomoy Bhattacharjee: What is the next big challenge in reforms?

There are reforms required in almost all sectors. But one important issue that becomes urgent is improvement in governance. This is not necessarily a reform issue in the particular sense of the term, but more efficient administration, timely policy decisions, things will become more critical as we go along. The role of the government in the social sectors is expanding. We really need to get the maximum out of the money that we are spending. I think the issue of governance would become more important as we go along. Land is one resource which is limited. Therefore, there would be competing demand for land as we grow. The land policy will assume importance in balancing the interests the economy—agriculture on the one hand and infrastructure and urban development, etc, on the other.

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