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  • Category: Miscellaneous

    Outgoing RBI Governor Raghuram Rajan argues for independent RBI

    Raghuram Rajan, who is going to step down as the RBI Governor tomorrow, suggested that it was legally not possible to pay a special dividend over and above the surplus generated by the RBI. He stated:"The RBI has to work under a framework set by the government and cannot be free of all constraints". Explaining the ups and downs in terms of macro-challenges, policy choices and managing fiscal and monetary flanks of the stabilization policy, outgoing RBI Governor, Raghuram Rajan argued for independent central bank for the country's macroeconomic stability. He was addressing the students of St. Stephens College, New Delhi.

    Mr. Rajan has been advocating autonomy of RBI for a quite long time. What is the opinion of the Members of ISC in this regard. Would the proposed autonomy of RBI be beneficial for the economy of the country?
  • #577878
    We all know that banks are put under lots of pressure to waive of loans especially agricultural loan in the past. In the past the Congress government used to conduct loan melas from the bank and those who are close to the party are the main beneficiaries and the banks wont get back the money which are waived off eventually. So if this kind of looting has been done by the politicians on the bank, RBI being the custodian of the banks, cannot keep quiet but to raise the voice of protest. Moreover RBI has to give dividend cheque to the government on its profit which it could have ploaughed back for future growth.
    K Mohan
    I consider myself as the learner everyday

  • #577886
    The main point is that the Governments are voted to power only for a maximum period of five years and the political leaders always try to get the next tenure also. Therefore they cannot alway go by the economic theories mentioned in the textbooks and research papers of the academicians. Often Government takes people interest (read their own interest) over and above the economic principles and theories and dictate/direct the agencies like RBI to moderate their guidelines in tune with the popular demands. Thus a clash of interest occurs between the ruling Governments and the RBI Governor.

    We can take the example of judiciary in India. Despite being a constitutional body, often friction and fissures appear between the legislative and judicial wings. The Chief Justice of India had cried in presence of the Prime Minister of India, few months back.

    Let us encourage each other in sharing knowledge.

  • #577909
    Whether RBI gets fully Independent authority or not, as they have been chosen by ruling Government so they will definitely some how obliged for them, and the rate cut of interest ( which is the main demand of all ruling party ) to satisfy the big industrialist will raise, and some time force fully RBI Governor will cut the rate, which brings some good cash flow for industrial growth but also it increases the inflation , and higher inflation means more suffer for the common man. Still I agree that RBI should have fully independence.

  • #577915
    An outgoing person has the freedom to say his mind. As he is sure that he will not be considered for a posting, he can take courage and say anything he wants.
    But the incoming person will not take that risk. He will be cautious and careful, as he has to start and pull on safely.

    Let us keep faith on ourselves and work sincerely, not leave everything to fate.

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