The RBI Governor, on Friday, October 3, explained that the central bank has no independence regarding the inflation-targeting framework. The responsibility of setting the inflation goal lies entirely with the union government, with the RBI providing its views.“The RBI is consulted every five years. We do a review, as you’re all aware, and we are in the midst of a review. While it comes to setting the target, there is no independence that the Reserve Bank has. It only has a view, which is communicated to the government and the final buck is with the government,” Sanjay Malhotra observed. He was speaking at the annual Kautilya Summit organised by the Institute of Economic Growth and the Finance Ministry.
Dwelling further on RBI’s degree of independence, the governor said the monetary policy committee has a major role in deciding the policy repo rate, which is the operational tool for the central bank. While the third lever in the framework is how to attain the operations that are to be done to align the operating target to the policy repo rate.
While complete flexibility or independence is given to the central bank to decide how to go about it, there is accountability embedded through a report that is sent to the government in case the inflation target is successively breached, Malhotra elaborated.“I think it has worked very well….India has done very well in giving the Reserve Bank, its central bank, the independence where it’s required, but with accountability features built into it,” the RBI Governor remarked in his concluding observation.Earlier on, Malhotra said that despite the current global odds, exacerbated by the tariff uncertainty, “ Indian economy seems well settled into an equilibrium of resilient growth. This is quite a feat for a large emerging market and makes India stand out as an anchor of stability in a volatile world,” the governor said.(Edited by : Ajay Vaishnav)
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