RBI governor Raghuram Rajan on Tuesday said that Central bank independence is necessary for stable growth. He even said that leaning bank balance sheets need logical conclusion. “The slowdown in credit growth has been largely because of stress in the public sector banks, stemming from past mistakes in lending. This will not be fixed just by a cut in policy rates,” he added.
“It is important that governments around the world look beyond sometimes uninformed and motivated public criticism and protect the independence of their central bank to act. That is essential for stable sustainable growth”, he added. Rajan has also pointed to the high inflation which guided his policy stance. “With CPI inflation currently close to the upper bound of our inflation target, few could sensibly argue that we have not been adequately accommodative. Of course, our last policy statement indicated we expect it to come down to around 5% by March 2017,” he said.
Rajan, a former chief economist at IMF announced last month that he would go back to teaching at University of Chicago, after facing criticism from BJP parliamentarian Subramanian Swamy. His three-year term at RBI would end in September.
It can be recalled Rajan faced attacks from a section of ruling BJP – notable among them Rajya Sabha MP Subramanian Swamy – for the way he has kept interested rates, which they alleged “killed” the domestic industry, especially the SMEs.
Rajan was also criticised by some for his statement comparing the India’s ‘fastest-growing’ tag to the ‘one-eyed king in the land of the blind’.