Relevance : GS Paper III (Indian Economy)
[900 words reduced to 150]
- A pushback is underway, globally, against central bank independence.
- Though independent central banks are better at controlling inflation., economies with independent central banks don’t always do better in financial crises.
- There is a dilemma on how much to leave to experts as compared to popularly elected governments.
- The recent global trends
- During the global economic crisis of 2008, the US Federal Reserve was accused of causing the crisis.
- In 2013 the Bank of Japan agreed to coordinate policy with the government.
- In recent years India’s RBI has been accused of starving a growing economy of much needed liquidity.
- The assumption that former bureaucrats are sure to be pliant RBI governors is misplaced.
- RBI governor needs to find a balance between taking tough, unpopular decisions and urgent economic imperatives.