Gist of Editorials: RBI’s Independence (The Economic Times) | GS – III

Relevance : GS Paper III (Indian Economy)

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  • 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.