Kamal Morarka

For RBI Governor, Caution Is Better Part of Discretion

Posted by Kamal Morarka Blog
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The monsoon session of parliament is coming to an end and compare to the sessions since the Modi government took over this definitely been a better one. Not only shouting between the ruling party and the opposition was negligible but also a lot of legislative business got done. Of course the main business was GST bill but other bills are also being passed without an atmosphere of confrontation. It is a good augury for democracy. The GST Bill itself is a difficult bill to implement. It depends on various states and various formulations what the tax rates will be etc., but in any country where GST has been introduced, it takes 5-7 years before it settles down and people get used to it. I hope all the states will behave responsibly and cooperate with the Centre.

The second thing is about Kashmir. Unfortunately, because of the follies of the central government Kashmir has again come into problem. It is alright for the Home Minister to say that only discussion with Pakistan will be on Pakistan Occupied Kashmir (POK). Theoretically it is correct because the parliament of India has passed numerous resolutions saying Kashmir is integral part of India and Pakistan must vacate aggression, but politically this does not take us anywhere. Some BJP members notably Mr. Yashwant Sinha has been saying that do not offer talks with Pakistan. There is no single authority there – the army is there, the ISI is there the civil government is there, the religious leaders are there. Nothing will be come out of it. And every time the government talks of talking, something happens – some Pathankot, and something like that. Of course it is another way of saying it when he say talk only on POK means we will not talk to you, because Pakistan is not settle to enter talk on the POK. The main issue is to how to bring peace in Kashmir. That is not answered by this. To say that Pakistan is creating trouble is one part of it, but you have your own youngsters, Indian citizens, Indian boys are angry. Unless you can sooth their temper, I am afraid we will not be able to govern Kashmir in any meaningful way.

Raghuram Rajan is retiring on 4 September. Three years people want to know what term was. It was like any other RBI governor. RBI governors are not supposed to make government policies, they are not been elected, it is an appointed post to do a particular job: the country’s monetary policy, interest rate, dollar-rupee parity, etc. Every governor, 22 before him, have all done well, maybe one or two exceptions but all governors know their job. The Reserve Bank is an institution with fixed parameters fixed; it is not something that they can really deviate. The problem with Raghuram Rajan tenure was that he was talking too much with the press. He has become a media governor. That is not a good thing. Finance Minister must make a statement, Prime Minister must make a statement, they are political people, even Finance Secretary or CVC Chairman does not make any public statement because they are bureaucrats. Governor is a slightly different position. Once in a year, twice a year you can talk. You can certainly hold a press conference and announce the rates. But to speak on every government policy as a reaction does not add to the dignity to either of Reserve Bank or its governor. I hope the new governor will understand and carry on the traditions of the Reserve Bank as they have been for so many years. He should not be tempted to enter into political field. If anybody is tempted he should resign and join politics. You have got lots of examples from so many fields who have joined active politics, but while you are a government servant and especially you are holding such an exalted place as the Reserve Bank governor, caution is the better part of the discretion. It is better to speak less or not speak at all than to speak things which create controversy. Now he has made a statement yesterday that he was open to an extension of his term but to many people criticized him. That is his own making. Whether he would have been reappointed or not I cannot say, because that is Prime Minister’s and the Finance Minister’s prerogative, but he did not inspire any confidence with the kinds of statements some of them not very responsible that he had go on making. I only hope that government’s new choice will be more sober and good.

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