Mumbai: Finance minister Arun Jaitley on Thursday admitted there were two-three areas of differences with the Reserve Bank of India (RBI), but questioned how a mere discussion on its functioning could be considered “destruction” of an institution.
Jaitley admits areas of difference between govt and RBI
Under attack politically for creating circumstances that led to the resignation of Urjit Patel as the RBI governor, Jaitley listed out a string of actions initiated by past governments, including Congress Prime Ministers Jawaharlal Nehru and Indira Gandhi, asking RBI governors to resign.
Speaking at the Times Networks India Economic Conclave, Jaitley said differences with the RBI included credit flow in the economy and liquidity support, and added the government had initiated a “discussion” to convey its concerns.
“A discussion with an important institution, which is independent and autonomous, to tell it that it’s a part of your (RBI’s) functions and therefore this is an important area of an economy which you must look at, how is it destruction of the institution?,” Jaitley questioned.
“We are the sovereign government, we are the most important stakeholders as far as the management of an economy is concerned,” Jaitley said, in reference to the discussions with RBI.
Jaitley reiterated that the RBI had the responsibility as far as credit and liquidity was concerned. “We are not taking over the function.”
He added the government was only initiating discussions using instruments which forced a discussion. “In some situations, the autonomous institutions also have to be informed that there is some difficulty arising in the system that requires to be corrected.”
Further, if the government was not able to convey the difficulties in the system, it would be failing its duty, he said.
The RBI’s policies also need to be in sync with the economic policies, Jaitley stressed.
Urjit Patel resigned on Monday citing personal reasons. The government has appointed retired bureaucrat Shaktikanta Das, who was at the helm of finance ministry during the controversial demonetisation exercise, as the new RBI governor.