Asserting independence of the central bank, Reserve Bank Governor Raghuram Rajan on Friday said it is he who determines the monetary policy and the government can fire him if it wanted.
“I determine the monetary policy. I say what it is. The government can fire me, but the government doesn’t set the monetary policy. So, in that sense, am I independent! Well, I am happy to talk to the government. I am happy to listen to the government but ultimately the interest rate that is set is set by me,” he said at St. Gallen Symposium in Switzerland.
Rajan was replying to a question on how much independence and real power he enjoyed as RBI Governor during a programme that was broadcast on Bloomberg TV.
The central bank, he said, works with the finance ministry and he has regular conversations with the finance minister.
“We (RBI) control the monetary policy. In India, what happens is when we want to do something big, we go, tell the government this is what we want to do and the government is usually supportive…. We talk to each other,” he said.
Replying to questions on growth, Rajan exuded the confidence that India would revert to 7-8 per cent growth rate with right kind of policies. However, he added, achieving higher growth would be difficult. India had registered over 9 per cent growth for a few years before the global financial meltdown of 2008 pulled it down. The economic growth rate slipped to decade’s low of 4.5 per cent in 2012-13. It inched up to 4.9 per cent in 2013-14. In the current fiscal the growth rate is expected to inch up to 5.5 per cent.
As regards inflation, Rajan said there was a need to bring it down.
Once inflation comes down, he said, it would be possible for the RBI to deal with other problems facing the economy, especially growth.
Finance minister P Chidambaram had on Thursday said that Rajan had an outstanding record and the next government must respect his appointment.