The government is not just a stakeholder. But the government of the day runs the economy, runs the country; manages major policy decisions, newly-appointed RBI governor Shaktikanta Das said.
Hours after taking charge as the new Reserve Bank of India (RBI) governor, Shaktikanta Das gave a glimpse of what his immediate focus would be, while making it absolutely clear that it’s the government that runs the country and the contentious issues between the central bank and the finance ministry can be resolved through dialogue.
“The government is not just a stakeholder. But the government of the day runs the economy, runs the country; manages major policy decisions. There has to be free, fair, objective and very frank discussion between the government and the RBI. I would like to believe all issues, howsoever contentious, can be resolved through discussions,” Das said.
Das was appointed the RBI governor on Tuesday, a day after Urjit Patel stepped down from the position following the simmering tension with the government on several issues such as lending restrictions on weaker banks and central bank’s reserves.
Amid the difference of opinion on these issues, invoking the never-used-before special powers under Section 7 of the RBI Act for consultation by the government was seen as an attempt to undermine the autonomy of the RBI. This led the question: Who should have the last say?
While addressing his first-ever press conference as the RBI governor, Das refused to answer questions on these specific issues. He, although, brought on the table the idea that the RBI Act mandates supporting economic growth as well.
“I am not bringing anything which is extraneous to the RBI Act. If you see the preamble of the RBI Act, which talks about MPC, it also says keeping in mind requirements of growth,” he added.
Das’ predecessors Raghuram Rajan and Urjit Patel were criticised for keeping the real interest rate too high which was, critics said, in turn, the country’s economic growth.
Few minutes after Das’ first address, the Consumer Price Index (CPI) Inflation, the anchor for repo rate decision, came as low as 2.33% in November, arguably giving room for the rate cut in February. Das acknowledged that the inflation outlook was “fairly benign” but said that the RBI will have to be watchful.
Das said he was going to focus on the banking sector immediately by kicking off consultation meetings with the public sector banks and private banks on Thursday. The Prompt Corrective Action (PCA) norms of the RBI, under which 11 PSU Banks are facing restrictions, was one of the contentious issues between the government and the central bank.