RBI, the Government and the Manifesto.

The need to have a strong and independent Central Bank is paramount and essential to strengthen the economy and its financial system. An independent Central Bank is really a strong support to  the elected Government to perform and project its image nationally and internationally. The friction and simmering relationship between the Central Government and RBI if brought to market and public notice can only damage the image of both and bring more harm to the Government in the process as it would be  construed as failure on its own part to deliver as per its manifesto and pass on the buck to the central bank by dictating terms against established Prudence, Convention and Practices. The autonomy and health of the Central bank if ignored can have ripple repercussions on the Economy ,the Government and People. This has to be understood by the politicians in power and their supporting bureaucrats by introspecting and seriously pondering as to how the Central banks in advanced and major economies function and how independent and accountable they are to the Governments in power. No Central Bank can be a Department of the Ministry of Finance. BUREAUCRATS and TECHNOCRATS have  different roles to perform which are complementary to each other and beneficial to the Nation and all its stake holders.The Common objective is to have a well performing economy deriving the intended benefits as per the Manifesto of the Government in power  and keeping the Institution strong and enviable.

Dr T V Gopalakrishnan

RBI , Central Government and the Economy

Though the Central Government has over riding powers in terms of RBI Act, the Circumstances  that led to invoke the section 7 would require to be justifiable and legally tenable in national interest. As long as RBI seem to have  acted with reasonable prudence in national interest and RBI Board  which Consists of  only  Government  Nominees and Government appointed nominees  approve all actions of RBI the need to invoke section 7 of RBI will have to be convincing and legally justifiable. The fact that the issues under dispute are actions initiated by the RBI  in national interest and have the approval  of the Board, how the need to issue fresh directions invoking section 7 has arisen can be taken  only with a pinch of salt by the general public..The fact that Government has failed in keeping its balance sheet strong and there is a need to draw down the reserves of the Reserve Bank will not be convincing in the absence of a very serious national calamity requiring Reserve Bank  come to the rescue of the nation as a lender of last resort.. Definitely and fortunately such a bad situation has not arisen and there are some differences where the coordination and understanding between the RBI and the Central Government are missing. The issues  having come to public notice calls for a national debate involving matured politicians having established statesmen qualities, bureaucrats who have proven achievements to perform without any political bias, academicians of high caliber, legal luminaries , Economists and men of high social standing and character It is not the question of RBI's independence , but it is the question of failure of the whole administration in enhancing the quality of administration in developing the economy and strengthening the much needed  strong Financial  system and  its stability and long term sustainability. Even the RBI Act may require an amendment if the Government desires transfer of its reserves than what  has been originally indicated as per the relevant provisions. After all people are interested only in their welfare and Institutions like RBI are set up exclusively for that with a difference that their Board of Directors are appointed to perform certain specific functions based on their academic qualifications, professional expertise and well established caliber in public service  and not elected..to pass on some freebies to win over the  poor masses. RBI has so  far lived up to its expectations despite  several ups and downs and challenges from domestically and internationally. markets and earned its Recognition and reputation as one of the best performing Central Banks in the world. The credit goes to the Governments in power for allowing the Institution to function independently and in close understanding with the Government. This needs to be continued in the interests of the Institutions' strength, the Government , the economy and all its stakeholders.    .   

Dr T V Gopalakrishnan