RBI versus the Government: Independence and accountability in a democracy

Описание: Conflicts between central banks and governments are embedded in the evolving discourse of every democracy. The recent discord between the Reserve Bank of India (RBI) and the Ministry of Finance (MoF) is neither the first nor likely to be the last. Institutionally, once a disagreement between the RBI and the MoF crosses the Rubicon, the government has the power to overrule the central bank’s decisions. Moreover, such a structure is not restricted to the RBI but applies to all regulators, whether financial or non-financial. In its law-making wisdom, Parliament has decided that since accountability rests with an elected government and not the expert official, so should powers. To argue otherwise will only be political rhetoric and will not stand the test of law. This paper makes the case that since the RBI’s most important monetary policy function has been protected by law through the setting up of the Monetary Policy Committee, all decisions beyond it fall within the realm of ‘accountability’, where the elected government has been enabled, again by law, to intervene when required. This is how it should be in any democracy. Read the paper: https://goo.gl/JQpziW