An independent RBI is a chimera

Abstract

In an emerging market economy like India’s where the main objective of macro policy is economic welfare, the central bank cannot work independently of the government. In recent months, the country has witnessed a raging debate on the > independence of the central bank. It raises an important question: independence of whom, and independent of what? In literature, independence of a central bank has to be contextual, and has four main dimensions: a) statutory independence from the state with respect to nomination, tenure and termination of the Governor; b) independence of monetary policy instruments, implying managing of the interest rate or liquidity; c) independence of monetary policy objectives — > inflation targeting, credit control, priority sector lending or any other objective which is stipulated by the government; and d) financing of government deficit. If the central bank has to ensure a responsible policy formulation, then to whom is the accountability?. Read more at: https://www.thehindu.com/opinion/op-ed/An-independent-RBI-is-a-chimera/article14990265.ece