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Journalism of Courage
Does a modernising India have the kind of central bank it needs? The question comes up because of a number of recent announcements by the RBI. The central bank declaring SEZs as more or less a real estate business, its position on the Naina Lal Kidwai issue, the continuation of an administered rate for savings accounts, its position on interest rates, its approach towards global capital flows in and out of India, its opposition to foreign banks even when the government has signed an agreement 8212; for example, with Singapore 8212; all these suggest the need for a thorough relook at the philosophy of central banking in India.
But can we expect the RBI to wake up to the fact it is part of a changing world and so change itself? To be a modern central bank and focus on its job as a monetary authority, the RBI would need to give up on its other roles 8212; banking regulator, regulator of government debt and currency markets and public debt manager. With 22,727 employees on its rolls and immense power in its hands, will the RBI be ready for a makeover? Both the problems the RBI focuses its attention on, and the solutions it seeks, belong to the 8217;60s, the heyday of quantitative controls.
