‘Wrath of Markets?’ DEA secy SC Garg’s tweet pokes RBI after Viral speech

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Updated: Nov 02, 2018 4:26 PM

An uneasy truce between Prime Minister Narendra Modi’s government and the central bank was tested two days after the administration said it respects the central bank’s autonomy. “Rupee trading at less than 73 to a dollar, Brent crude below $73 a barrel, markets up by over 4% during the week and bond yields below 7.8%. […]

G20 meeting, subhash chandra garg, rising oil prices ,finance ministry, GPFI process, global economy, New Development BankDEA Secretary S C Garg’s tweet suggests that tensions between the government and RBI continue to simmer.

An uneasy truce between Prime Minister Narendra Modi’s government and the central bank was tested two days after the administration said it respects the central bank’s autonomy. “Rupee trading at less than 73 to a dollar, Brent crude below $73 a barrel, markets up by over 4% during the week and bond yields below 7.8%. Wrath of the markets?” Subhash Garg, economic affairs secretary, said on Twitter Friday.

Garg is taking advantage of a rally in emerging Asian markets to send a riposte back at Reserve Bank of India Deputy Governor Viral Acharya, who last week said governments that don’t respect central bank independence “will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution.”

The tweet suggests that tensions continue to simmer, with the government pushing the RBI to provide more liquidity to troubled non-bank finance companies, and part with more of its reserves to fund the nation’s fiscal deficit. The rupee fell Wednesday morning when it was reported that officials sent letters to the central bank, citing special powers which if invoked, could lead to the government directing RBI to do its bidding.

“The market is hoping that the rife has been amicably settled,” said Lakshmi Iyer, chief investment officer of debt at Kotak Mahindra Asset Management Co. in Mumbai. “But if it shows some signs of resurfacing, there can be uncertainty.” Indian markets haven’t been taking a lot of positive news in stride lately, she said. That sentiment seems to be turning with the rupee headed for a weekly gain and bonds posting their first monthly gain in October in three.

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