Niranjan Rajadhyaksha feels that RBI’s independence from the government is worth preserving as, otherwise, it might return India to the days of directed credit, outright deficit monetisation, etc. That is his broader concern. I think his fear is legitimate.
Given that, he is more inclined to overlook RBI’s failings and turn a harsh spotlight on the government. He is right, given the line in the sand that he has drawn. I must say that if RBI headed in that direction under the new Governor, it would not be progress but regression.
But, should that come in the way of judging Urjit Patel’s tenure? Niranjan feels Urjit Patel stared down the government on more than one occasion. That may be right but a narrow consideration, in my view. I had commented on it when that happened.
He credits Urjit Patel with stabilising the inflation mandate and the new Monetary Policy Committee arrangement. R. Jagannathan of ‘Swarajya’ has different and more valid views on them. See below.
But, there is yet another broader issue and that is one of consumer interest. I have long opposed the formation of appellate tribunals to contest policy decisions of RBI. There is judicial redress. But, on consumer matters, perhaps, is there a need for a higher authority, above RBI, since RBI seems intent on protecting banks rather than consumer? Read Monika Halan here. I hope readers will remember the blog post I wrote on November 27 where I had linked a piece by Debashis Basu in ‘Business Standard’. Debashis Basu’s piece is well worth a read. Monika Halan links to another piece by him in her op.-ed cited above.
I have heard this from some friends who had worked for other regulators that RBI operates more as a ‘Don’ who protects his men (banks, here) rather than as a neutral regulator of the entities that come under its watch.
More narrowly, specifically with respect to Urjit Patel, R. Jagannathan minces no words in evaluating his tenure. He sheds no tears and he makes equally valid points too. Inflation forecasting failures and the consequent needlessly tight monetary policy – based on a doctrinaire adherence to their inflation targeting mandate – come under deservedly harsh scrutiny from him.
If we are keen on preserving institutions that have stood the time, as RBI undoubtedly has, we should also not hesitate to call out its mistakes and its shortcomings. No one is above or can be above criticism. If the survival and the thriving of an institution is in national interest, then we will be failing the institution if we don’t hold it to a higher standard.
In my previous blog post on this topic, I had mentioned clearly what RBI has to do on its part. As for the government, in this blog post, I had mentioned what the Government should do, with respect to RBI.
On inflation targeting, if the new Governor revisits the 4% mid-point and redefines the range around it making it asymmetric, I will support it. See here for my column on whether inflation is really a matter for monetary policy and, see here for my views on the inflation targeting framework in India.
Lastly, I do not have a view on Mr. Shaktikanta Das. I do not wish to pre-judge him. Let us wait. What is the rush?