Statutory protection for the RBI Governor’s term is needed to strengthen the independence of Reserve Bank of India (RBI), Raghuram Rajan said.
Statutory protection for the RBI Governor’s term is needed to strengthen the autonomy of Reserve Bank of India (RBI), Raghuram Rajan said, adding It’s important that the central bank has operation independence.
“….maybe it is time that we set statutory limits or (provide) statutory protection for the term of the RBI Governor. The term of the Governor should be protected, so that the person cannot be impeached or fired unless there is a dereliction of duty,” he said.
Similar to the Lokpal, India could have a constitutional clauses for the protection of central bank governor’s term, he also told The Indian Express.
There is a need to have a limit on the powers government wields, said the renowned economist, who went back to the University of Chicago as a professor after his stint at the Reserve Bank between September 2013 and September 2016.
Citing example of the budget making process in various other countries, Raghuram Rajan said that an independent Fiscal Commission or Council makes the entire financial exercise believable, and it’s needed in India too.
“Constitutional limits are a consequence of the distribution of power. When I say limits, it does not have to be constitutional amendments. Is it time for us to discipline ourselves with that. Otherwise, the government can spend what it wants and not be constrained by anything”, he also told The Indian Express.
After the government is provided with a mandate either in terms of the financial stability or price stability, it should be allowed to carry out the exercise. If the government fails to deliver, the institution can hold them to account, he added.