Reserve Bank of India Governor Raghuram Rajan on Wednesday said there were some issues over which the Modi government and the central bank were “trying to persuade one another” but on many others the two sides are on the same page.
Dr. Rajan seemed to suggest the proposed Public Debt Management Authority (PDMA) could be an issue on which they differed.
The PDMA is supposed to take over from the RBI the task of managing the Centre’s borrowings.
Concerns about a central bank also being the public debt management authority though not entirely unwarranted were perhaps overblown, the Governor said in an exclusive interview with The Hindu .
“If you look across countries there have been concerns that a central bank being the public debt management authority may be lacking in some of its functions… In my many years at watching the RBI, I haven’t seen it change monetary policy because it is not worried about anything other than inflation,” said Dr. Rajan.
Perception of conflicts If there was a perception of conflicts in the RBI then there was some rationale to having an independent agency to take over.
He, however, cautioned that conflicts were on both sides as the government also owns public sector banks and the LIC.
The same conflict that existed in the RBI shouldn’t be transferred to the proposed entity which might end up having closer links with the government, he explained.
Click >here to read the full interview.
