RBI’s ability to say ‘no’ to government must be protected: Raghuram Rajan

"RBI has to work under a framework set by government and cannot be free of all constraints," he added.

By: Express Web Desk | New Delhi | Updated: September 3, 2016 4:13 pm
Urjit Patel will carry forward inflation fight: Raghuram Rajan Outgoing RBI Governor Raghuram Rajan (File Photo)

Outgoing Reserve Bank of India Governor Raghuram Rajan on Saturday said, India needs a strong and an independent RBI to ensure macroeconomic stability, which is of paramount importance. Delivering a lecture on ‘independence of the central bank’ at the St. Stephens College here, the outgoing governor said the central bank cannot be free of all constraints as it has to work under a framework set by the government.

Recalling his predecessor D Subbarao’s comments on policy differences with the government, Rajan said he “would go a little further” as he believes that “the Reserve Bank cannot just exist, its ability to say ‘no’ has to be protected.”

Rajan further added that paying special dividend out of its (RBI) surplus to government will not help address budgetary constraints. “RBI has to work under a framework set by government and cannot be free of all constraints,” he added.

READ: Urjit Patel will carry forward inflation fight: Raghuram Rajan

He also explained the economic rationale behind why the RBI cannot pay special dividend to the government in addition to the entire surplus being paid out for last three years.

Rajan’s term ends on September 4, after which Urjit Patel will take over as the Governor of the Central Bank. In one of his first comments since Patel’s was named by the government, Rajan had said, “I am confident that Urjit Patel, who has worked closely with me on monetary policy for the last three years, will ably guide the Monetary Policy Committee going forward in achieving our inflation objectives.”

Rajan had previously indicated his willingness to remain at the helm of central bank to finish pending tasks, but was unable to reach a deal with the government. When he was asked why he didn’t reach an agreement with the government on a second term, Rajan said he saw it as a three-year duty even though some differences may have cropped up over period of his extension. “There were variety of places where differences may have been in terms of horizons and this and that. I think we just didn’t reach an agreement where … remember my term came to an end, so it had to be a new term.” Rajan said he was engaged in a dialogue with the government “whether it made sense for me to continue.”

READ: Was willing to stay provided we could reach right kind of agreement, we didn’t: Raghuram Rajan

Rajan also faced flak from the government after his speech on the growing intolerance in the country. Rejecting criticism of having spoken ‘out of turn’ on various occasions, Rajan said it was the ‘legitimate duty’ and ‘moral responsibility’ of public figures to tell young minds what good citizenship is about and the virtues of tolerance.

Asked about what he had in mind when he made the speech at IIT-Delhi in October last year, Rajan said, “… I had the environment certainly at the back of mind where there was a discussion certainly about tolerance.”

In one of his recent statements on the Indian economy, Rajan highlighted the upside risks to inflation and said that the Indian economy is still growing below its potential. According to him, the key weakness is in investment, with private corporate investment subdued because of low capacity utilisation, and public investment slow in rolling out in some sectors.

(With PTI and ENS inputs)

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  1. R
    Raj
    Sep 3, 2016 at 1:09 pm
    Proper paid agent. Was your mother one too?
    Reply
    1. R
      Raj
      Sep 3, 2016 at 1:06 pm
      The Emperor is busy modelling for his masters whose relative has been appointed the new Guv.
      Reply
      1. K
        Kaa
        Nov 23, 2016 at 8:32 am
        LoL
        Reply
        1. H
          Harry Achari
          Sep 3, 2016 at 4:08 pm
          Does an emperor have a master? You know what emperor means my dear. Dogs have masters. You send this further to your master Pappu
          Reply
          1. H
            Harry Achari
            Sep 3, 2016 at 4:02 pm
            I read often your hate comment. Is there no job for you in stan while you are one of the most suitable persons who can carry suicide belt? and surely you are gonna be paid. I shall give you more advices in future.
            Reply
            1. M
              MyTake
              Sep 3, 2016 at 8:09 pm
              (RBI’s ability to say ‘no’ to government must be protected: Raghuram Rajan)lt;br/gt;lt;br/gt;Point taken. Using same logic, therefore, RBI should not be talking about hot topics of politics (intolerance being a burning issue at the time)! It should work both way.
              Reply
              1. M
                MyTake
                Sep 3, 2016 at 7:59 pm
                RR right or wrong in his past that's different story. Great that he is fighting out of conviction. Open fight of idea is the gurantee for people getting the best and getting educated at the same time.
                Reply
                1. M
                  MyTake
                  Sep 3, 2016 at 10:17 pm
                  There is a thing called embarring the Govt. he was working under which is again more of politics rather than any merit in it! Everybody knows what was that intolerance is and who are the main players here! All said if he still had any serious reservations, as an employee of the Govt. he could voice is concern to the Govt not to media! It is not Bollywood affair, either!
                  Reply
                  1. J
                    Jayakumar
                    Sep 3, 2016 at 6:49 pm
                    Why didn't you protect our money from Mallya my dear high falluting guru.
                    Reply
                    1. S
                      Syama uppuluri
                      Sep 3, 2016 at 3:04 pm
                      Thankfully, September 4th is only 2 days away!!!!
                      Reply
                      1. P
                        Pissgt;Ongt;Brahmans
                        Sep 3, 2016 at 2:45 pm
                        You are such a subamanium swami bhakt. Ready to talk BS that has no sir pair
                        Reply
                        1. A
                          ak dev
                          Sep 3, 2016 at 5:49 pm
                          Go please go. Give these lectures to American students.
                          Reply
                          1. A
                            Anuradha Kalhan
                            Sep 3, 2016 at 9:44 pm
                            Yes indeed every insution has a job . The RBI should say no to the government and government to Ambani if needed !lt;br/gt; India will be sorry to see Rajan go! He used every public platform to speak sense , truth and serve the nation in a manner he saw fit . That lost him his job but earned the respect of millions. Not enough people do that.
                            Reply
                            1. G
                              Gopal Arora
                              Sep 3, 2016 at 5:00 pm
                              Even if it means protection of the guilty?
                              Reply
                              1. B
                                Bijan Mohanty
                                Sep 3, 2016 at 4:30 pm
                                Modi's attempt to dilute the independence of RBI is deplorable. Rajan spilled the truth in a polished manner.
                                Reply
                                1. B
                                  Bijan Mohanty
                                  Sep 3, 2016 at 6:14 pm
                                  Rajan has learnt the art of giving lectures from Modiji only.
                                  Reply
                                  1. J
                                    jk
                                    Sep 3, 2016 at 5:31 pm
                                    There are not many who will say No as they will be afraid of being bed Antinational
                                    Reply
                                    1. C
                                      c
                                      Sep 3, 2016 at 1:04 pm
                                      C p Chandra das from Memphis, Americalt;br/gt;lt;br/gt;Raghuram Rajan , after his three years tenure as the governor of the RBI, is now relinquishing his office and is going back to to the university of Chicago in USA.lt;br/gt;The nation will always remember him for his valuable services. He has boldly highlighted the independent role of the governor till date, and it will be beneficial for India to follow his approach to strengthen the nation. His successor, again is a man of wide experience, and one hopes that he will finish the unfinished tasks of the outgoing governor to strengthen india
                                      Reply
                                      1. D
                                        Debjit Mishra
                                        Sep 3, 2016 at 11:58 am
                                        Get lost Chor.
                                        Reply
                                        1. T
                                          T DUTTA
                                          Sep 3, 2016 at 4:05 pm
                                          IN ENGLAND THE CENTRAL BANK IS KNOWN AS BANK OF ENGLAND---IN OUR COUNTRY BANK OF INDIA IS A BANK---IT IS NOT THE CENTRAL BANK----SIMILARLY IN MANY COUNTRIES THE CONTROLLING BANK IS KNOWN AS CENTRAL BANK---IN OUR COUNTRY CENTRAL BANK IS ANOTHER BANK LIKE BANK OF INDIA
                                          Reply
                                          1. T
                                            T DUTTA
                                            Sep 3, 2016 at 4:07 pm
                                            SOME PEOPLE MAY SAY WHAT IS IN A NAME?---but sometimes some people may be CONFUSED
                                            Reply
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