Friday, September 20, 2013

Dr Subbarao proved right by Dr Rajan, the new Governor

Once in RBI chair as Governor, one cannot erase the footsteps of all predecessors, as RBI has no political agenda and it has only the mandate to maintain the value of rupee, monetary and financial stability, contain inflation and provide adequate support to growth in the over all interest of the economy. This is what Dr Rajan also did through his monetary policy review though he has not even completed four weeks after taking over charge as Governor and lot of expectations were there from him from the Government, markets and corporates. Traditionally and historically, the Governors do provide support to the Government and facilitate the economy to grow but they can and will never be a party to the Governments' profligacy and ineffective economic policies leading to catastrophic economic conditions as we see it today. This is clearly a message to the Government that inflation needs to be brought down first for any other improvements in the economy. Low inflation itself will lead to better savings,investment,growth and employment. This is the theory successfully pursued world over if people's welfare is the objective of the Government. The policy from the new Governor clearly demonstrates that  RBI is perhaps the only and unique institution which cannot be easily pressurized to dance perfectly to the tunes of the Government.

Dr.T.V.Gopalakrishnan

No comments: