Opinion | Protecting the central bank’s independence
Live MintReserve Bank of India deputy governor Viral Acharya’s A.D. Shroff Memorial Lecture last week was the second occasion within a month when he chose to deliver a strong message. European Central Bank president Mario Draghi recently raised the issue of the threat to central banks’ independence from governments. It is also in the interest of the government that the central bank is seen as taking independent decisions; sending the right signal here helps maintain macroeconomic stability. In this context, Acharya rightly noted: “Far-sighted government leaders may be able to reap benefits of convincing voters about the importance of investing in macroeconomic stability; for instance, by claiming credit for the long-term nature of financial sector outcomes attained by allowing the central bank autonomy in decision-making and delivery of its core functions.” As Acharya highlighted, it is only after deregulation and reforms in the 1990s that monetary policy in India attained modern features. The present government got the legislation passed to make RBI an inflation targeting central bank with a monetary policy committee.
History of this topic
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