Source: The Hitavada      Date: 14 Dec 2018 12:00:11

THE nation must thank new Reserve Bank Of India (RBI) Governor Mr. Shaktikanta Das for carrying forward the discourse on the issue of the relationship between the Government and the central bank. In the light of the recent resignation of Dr. Urjit Patel from the RBI’s governorship, the issue has assumed great importance. Very rightly, Mr. Shaktikanta Das has agreed that the Government that runs the economy must have a greater say when the principle of autonomy of the central bank blocks sane and clear thinking on institutional relationship. Even though Mr. Das has asserted that the RBI’s autonomy must be upheld, he has talked of its accountability, too, as a major norm that should govern the conduct of the central bank. This clearly-worded acceptance of the norm of accountability by an RBI Governor is a major booster dose to the task of taking the discourse further and keeping it healthy. 


The most unfortunate part of the recent discourse on the RBI’s autonomy was that most commentators stretched the principle rather too far. The Hitavada refused to be drawn into any one-sided argument on the issue and raised the point of sovereignty principle that is actually the bedrock of constitutional philosophy. We believe firmly that under the umbrella of sovereignty, all institutions, including the Reserve Bank, must abide by the norm of accountability no matter the issue of autonomy. For, autonomy is an operational principle by way of which an institution -- like the Reserve Bank or the Election Commission -- has enough freedom to operate without fear or favour in normal times. In the life of a nation, however, there could come up some abnormal -- or extraordinary -- moments when the response to the challenge has to be different. In such situations, the Government, the most important holder of sovereignty that it gets directly from electors, has to have an appropriate and authoritative say in matters of national importance.

Mr. Shaktikanta Das has shown a remarkable understanding of this rather complex aspect of institutional relationship of autonomous agencies under the sovereign umbrella. By doing so, not only has Mr. Das replied to countless queries bubbling up in people’s minds but has also asserted that in the gamut of economic management of the country, the Government must have a greater say than should the central bank. In that manner, Mr. Shaktikanta Das has validated the Government’s current stand the Section 7 of the Reserve Bank of India Act empowers it to seek and ensure appropriate consultations with the central bank in extraordinary situations like the present one.

Currently, the Government is looking forward to a sensible share of the federal reserves held in its custody by the Reserve Bank. There might not have been any direct refusal by the RBI on this count. Yet, several critical and delicate philosophical and also operational issues cropped up, ultimately leading to the exit of Dr. Urjit Patel, whose own contribution to the country’s central banking system has been immense. Yet, the very purpose of the clause allowing sensible consultations between the Government and the Reserve Bank got defeated when certain adamance blocked the path.

Fortunately, Dr. Shaktikanta Das has responded most maturely to the complex issue. It is obvious that he is not signing on a politically-dotted line even though he has been a Government bureaucrat all his life. It appears that Mr. Das has understood correctly his role in the given situation and tried to set right the confusion in the country. In the light of the core principle of sovereignty, the stand of the new RBI Governor is most welcome since he has put all dimensions of the issue correctly in their respective places.