RBI, Government and the New Governor

This refers to your editorial “The Promise of Change” (Business Line August 8).As rightly pointed out if the appointment of Raghuram Rajan as the next Governor of the Reserve Bank of India can bring in improved relationship between the Government and the Reserve Bank, that itself will go a long way in enhancing the confidence in the economy a lot. The problems faced by the economy are basically from the inadequacies of the fiscal and monetary policies and these have arisen due to lack of coordinated approach and mutual understanding between the Government and the RBI. The Government failed to appreciate the stance of the RBI policy to contain inflation to ensure sustainable growth and did not support the move of the RBI which led to widen the gap between the RBI and the banking system. The banking system lost its focus to concentrate on its basic functions to mobilize savings of the households and lend to productive purposes. The final result is that the economy lost its grip on growth and retail inflation, the Government lost its grip on building the vital business confidence, the RBI lost its grip on growth and the banks lost its grip on savings and good lending culture. Hope the change of Governor will bridge the gap between the Govt and RBI and bring in the promise of change very badly needed by the economy to boost the confidence level wherein the solution for all the ills of the economy lies.   

Dr.T.V.Gopalakrishnan