I decide monetary policy: RBI's Rajan
10 May 2014
Asserting independence of the central bank, Reserve Bank governor Raghuram Rajan today said determining monetary policy was his call and the government could fire him if it wanted.
"I determine the monetary policy. I say what it is. The government can fire me, but the government doesn't set the monetary policy. So, in that sense, am I independent! Well, I am happy to talk to the government. I am happy to listen to the government but ultimately the interest rate that is set is set by me," he said at St Gallen Symposium in Switzerland.
Rajan's assertions came in reply to a question as to how much independence and real power he enjoyed as RBI Governor, during a programme that was broadcast on Bloomberg TV.
He added, the central bank, worked with the finance ministry and he had regular conversations with the finance minister.
He said, the RBI controlled the monetary policy. He added, in India, what happened was when the RBI wanted to do something big, the bank told what it wanted to do and the government was usually supportive. He said the government and the RBI talked to each other.
Replying to questions on growth, he voiced confidence that India would revert to 7-8 per cent growth rate with the right kind of policies.
He added, however, that achieving higher growth would be difficult. India had logged over 9 per cent growth for a few years before the it was pulled down by the global financial meltdown of 2008, with the economic growth rate falling to a decade low of 4.5 per cent in 2012-13.
It increased to 4.9 per cent in 2013-14 and the current fiscal was expected to see growth rate inch up to 5.5 per cent.
Regarding inflation, according to Rajan, there was a need to bring it down.
Once inflation came down, he said, it would be possible for the RBI to deal with other problems facing the economy, especially growth.