Letters: Institutional credibility

Abheek Barua's article "Policy on the hop?"(March 16) is an excellent open analysis of the challenges faced by the Reserve Bank of India (RBI) in the context of a top-to-bottom revamp of its own structure and the credibility issues arising from the rushing through of some of the half-baked Financial Sector Legislative Reforms Commission (FSLRC) recommendations. This deserves to be taken seriously by both the RBI and the finance ministry for a quick "stop, look and proceed" with regard to the speed and direction of the policy vehicle they are riding. The effort to divide responsibilities with regard to the fiscal and monetary policy responsibilities now being attempted, while theoretically better, might lead to more problems.

One wishes, even at this stage, wiser counsel prevails with the Government of India to review the decision to hurry with the move to transfer the responsibility of managing public debt from the RBI to the finance ministry. Not long ago, we had seen regulators, including the RBI, reiterating day in, day out that they enjoyed statutory autonomy. The current government has successfully created an environment of mutual respect between the finance ministry and the regulatory and supervisory bodies in the financial sector. As mentioned in the article, the time is not ripe to try new experiments in public debt management.

M G Warrier Thiruvananthapuram

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