This refers to the report “RBI accountable to Centre, says Bimal Jalan” (January 11). Facts first. The former RBI governor who is now chairing the Economic Capital Framework Panel appointed by the Reserve Bank of India (RBI) has reportedly said in an interview given to Reuters that “the RBI is accountable to the government for executing the kind of monetary policy that has been announced”. Jalan has said the obvious. Here is why.
After the Monetary Policy Committee (MPC) was formed, the RBI announces the monetary policy based on the majority view taken by the MPC. The MPC that has statutory backing has three members including the governor from RBI and three experts nominated by the government of India. In such committees, once constituted, members apply their independent minds in deliberations and decisions are taken in public interest. A practice different from legislatures where political parties can use a whip. The governor who chairs the MPC has a casting vote, not to give RBI any specific advantage, but keeping in view the chances for a tie because of the even number (six) membership. In a way, all the members of the MPC are government nominees. In the circumstances how the thought of RBI going back on monetary policy announced by it came to Jalan’s mind is intriguing. An answer may emerge in the coming days.
M G Warrier Mumbai
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