Independence depends on your actions: CEA Subramanian's jibe at Urjit Patel

Earlier, the RBI Governor had lashed out at the government at a public forum for not giving the central bank adequate powers to prevent scams like the one involving Nirav Modi at PNB

Chief Economic Advisor Arvind Subramanianon Monday took a not-so-subtle jibe at RBI Governor Urjit Patel, saying the independence of the central bank wasn't a matter of law alone, but also of 'actions and decisions'.

The Indian Express reported that the top govt economist emphasised the importance of maintaining the central bank's credibility and coordinating well with the government to help the economy. 

The CEA's statement, made at an event in Delhi's Jesus and Mary College, was read in the context of the RBI Governor's earlier statement lashing out at the government at a public forum for not giving RBI adequate powers to be able to prevent scams like the one involving Nirav Modi at Punjab National Bank (PNB). In the wake of the Rs 127-billion fraud, Patel had complained about the ''very limited authority'' of the RBI to monitor public-sector banks (PSBs). 

In a speech at a law university in Gujarat, the RBI chief had said there were numerous limitations in RBI's powers over state-run lenders, such as its inability to remove directors, replace management, push through a merger and initiate liquidation.

"If we need to face the brickbats and be the Neelakantha consuming this poison, we will do so as our duty; we will persist with our endeavours and get better with each trial and tribulation along the way," Urjit Patel had lamented.

The Indian Express also quoted Subramanian as saying that central banks might have to do what governments could not. He cited the example of the European Central Bank and the US Federal Reserve taking risks with their balance sheets and not conforming to the traditional role of a banking regulator. 

The CEA also said that one of India's biggest challenges was getting more people to pay income taxes. "I think that is very critical and we are really falling short on that. Any direct tax system must encourage voluntary compliance to get more and more taxpayers in, and this is something we should be focusing on," he said.

Subramanian added that the task force on direct tax reforms would submit its report in the next 4-5 months. In November last year, the government had constituted this task force to redraft the 50-year old income-tax law and bring it in sync with the economic needs of the country.