This refers to “A spat swallows RBI’s autonomy” (July 27). The discussion over the Ulip ordinance and the letter written by the RBI governor pointing out the likely unwelcome consequences in case the ordinance is converted into a formal piece of legislation ignores the main point.
The main issue is the refusal on the part of the political authority, which has been in a position to control and manipulate the tripod of the legislature, the executive and the judiciary, to recognise the emergence of money as the fourth constituent of the power in the emerging world and the importance that institutions in the financial sector are gaining day by day.
The rupee is much more than a mere symbol and any dilution in the autonomy of RBI may cause irreparable damage to the Indian economy at this stage of development.
RBI has so far shown the maturity to fall in line with North Block and has expressed its serious reservations on policy perceptions only in meetings with officials of the finance ministry or with the finance minister himself. But if this mature behaviour is mistaken for weakness and the institution is stifled using legislative supremacy, thereby making performance of its mandated functions difficult or redundant, the resultant disharmony in relationships may not augur well for the economic growth of the country.
The need of the hour is to have a central bank with a strong balance sheet and a mature head capable of absorbing shocks on the economy, which are a result of a fiscal policy suffering from external influences and internal pressures unavoidable in coalition politics.
M G Warrier, Mumbai
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