RBI vs govt: Central Bank would do well to seek autonomy within a framework

There is need for tactical give-and-take: The board should advise in favour of more liquidity in the system, and set up a committee to decide if RBI has surplus reserves to hand over, writes T N Ninan

The general drift of published commentary since the spat between the government and the Reserve Bank of India (RBI) became public has been as follows: A showdown should be avoided, and both sides should pull back; the government has a point on the need for more liquidity in the system; drawing on RBI reserves to keep the fiscal situation under control is not a good idea; finally, after having packed the RBI’s central board with political fellow-travellers, to now ask such a board to take decisions so far left to the management is best avoided. The board can provide oversight