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Faceoff between the RBI and Government of India: The buck stops here!
Recently RBI deputy governor Viral Acharya said that the government shouldn't be playing twenty-twenty and the RBI should remain independent or autonomous.

On the other hand Finance Minister Arun Jaitley has been critical of RBI's stand on various rates, liquidity etc. There are rumours that RBI governor Urijit Patel may resign followed by long-term confrontation with the union finance department. Also it's being said that the government may use section 7 of the RBI Act to issue instructions to the RBI to act in the interest of the nation's economy.

In this atmosphere when elections are near, the opposition parties could target the government for diluting the autonomy of the RBI, but then, they would have to swallow their previous allegation that Urijit Patel is Modi's handpicked man.

However, coming back to the RBI versus Central government face off, I am not a financial expert. But I have two solid reasons to support the government, in case this debate is raised. First, Section 7 of the RBI Act is provided to solve a case when both the government and the RBI come to a stalemate condition. The present government didn't make this rule, but it has been existing for seventy years. The framers of this act very well knew that such a situation could arise.

But then, who is responsible for the economic problems? Isn't the government accountable? Does anybody ever blame the RBI?

Banks were nationalised way back in 1969 with an objective to ensure lending boost to underserved categories such as farmers, small businesses and home buyers. That never happened because successive governments had least control over nationalised banks regulated by the RBI. On the other hand, for mysterious reasons banks have lent undeserving people with or without politician intervention resulting in to huge NPAs while the RBI remained a mute spectator.

If there's government control over the Central banks, then the economy could suffer irreparably. A case in point is the example of Argentina. But then, take the example of China, where the country's Central bank is totally under the political masters. Isn't China's economic growth eye catching?

Every nation has its own systems. India is a country of 1.2 billion people, one-sixth of the world population. It has a democratic setup where the government is accountable for everything. In such a situation, the RBI in the name of autonomy can't do whatever it thinks right.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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