The Narendra Modi government wants to control the Reserve Bank of India's (RBI) rate policies by forming a committee in which four members would be appointed by the government and three by the RBI. This is a blatant attempt to corrode the RBI's sovereignty by succumbing to pressure from the industry. This is a ruinous path as rates are bound to come down, but this will not lead to any improvement in the economy. This is an attempt to divert banks' fixed deposits to the stock market so that the index keeps climbing.
In the US and Europe, rock-bottom bank lending rates have failed to revive economies. The economy is cyclical in nature; it cannot grow perpetually. Y V Reddy, the RBI governor in 2007-08, did not give in to pressure from the then finance minister and industrialists. That saved our country from a financial meltdown. The current RBI Governor, Raghuram Rajan, should resign in protest.
Sudhir Keshav Bhave Mumbai
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