Gist of Editorials: In a Spirit of Accommodation (The Hindu) | GS – III

Relevance : GS Paper III (Indian Economy)

[1300 words reduced to 200]

  • Recently, there has been a spat between the Reserve Bank of India (RBI) and the government.
  • Section 7 of the RBI Act gives the government the right to issue directions to the RBI in public interest.
  • The recent setting up the Monetary Policy Committee is a giant step forward in terms of giving the RBI autonomy.
  • There is a distinction between autonomy as a monetary authority and autonomy as a regulator. In the first case, autonomy has to be full. In the second case, autonomy is somewhat vague.
  • RBI and board
    • The right way of interpretation about the relationship between the RBI and board is that have concurrent powers in almost all matters.
    • The board has members nominated by the Central government from various walks of life which can result in a conflict of interest. Therefore, the board has largely functioned as an adviser.
  • Way forward
    • It is important to have continuous and sustained dialogue.
    • While the Governor can act on his own, he must listen to other members as well.
  • The RBI, the board and the government must understand the limits to which they can push. A spirit of accommodation must prevail.