vina wrote:Well, the idiotic attempt by the Govt to destroy the independence of the Reserve Bank by having a committee with a majority of 4 rubber stamping baboons saw a sharp response and the govt is thankfully back pedalling on that idiocy and hopefully will see some sense.Blame game passing between two sets of people, the govt blaming a committee and the committee flat out denying that the 4 baboon majority and no veto for the RBI Governor was their recommendation.
Just because you can't post in the politics thread for fear of a negative response does not mean you can use this thread as proxy.
Here's what the news is about:Removing RBI Governor's veto on rates not a FSLRC proposal
The revised draft of the Indian Financial Code (IFC), which proposes that any decision on monetary decision should be taken by majority by a seven-member committee without any veto power to the RBI chief, has created a furore and was seen as an attempt to curtail the central bank's autonomy.
This prompted the government to claim that the draft IFC was not a "report of the government or of the Finance Ministry" and it was based on the FSLRC report.
"It is not true," Financial Sector Legislative Reforms Commission (FSLRC) Member M Govinda Rao told PTI.
"There is a misconception that the revised draft of IFC is a report of FSLRC. But that is not true. The term of the FSLRC ended in 2013," Rao said, while adding that RBI Governor should indeed have a "veto power" in the monetary policy.
Rao's comments are in sharp contract to the statements made by Finance Minister Arun Jaitley and other top officials including Chief Economic Advisor Arvind Subramanian, who have said the revised IFC draft was as per FSLRC recommendations.
While the first version of IFC, as recommended by the FSLRC over two years ago in March 2013, had also suggested a Monetary Policy Committee (MPC) to decide on policy rates, it had recommended a veto power to the central bank chief.
The revised draft, released by the Finance Ministry last month on July 23 for public comments till August 8, has suggested doing away with this veto power and wants the seven-member MPC to take decisions by a majority vote.
Subramanian also said, "FSLRC report is a report of FSLRC. It is not the report of the government or the Finance Ministry. The report is not the view of the government."
Seeking to clear the air over the entire episode, Rao said that FSLRC had not recommended dilution of the powers of the RBI Governor in deciding policy rates.
"Once you assign the responsibility of price stability or inflation targeting to the RBI, it follows from there that the RBI Governor should have full say in deciding the interest rate," Rao said.
He further said that the mandate of the monetary policy committee should be to assist RBI in deciding the policy and it was important that the RBI Governor retains "veto power" in deciding the monetary policy action.
"There is a specific role of the RBI and the FSLRC recommendation had taken that into account. RBI Governor should have the power to decide on monetary policy action and I hold on to that view," the FSLRC member said.
As far as I can tell, the recommendation on removing the RBI governor's veto has not been removed from the draft. Rather, they simply said "it was the FSLRC's idea" and FSLRC said "no it wasn't". This isn't a constitutional amendment and will go through.
The FSLRC itself is an UPA-2 era creation:
FSLRC, which was set up in 2011 to review and rewrite the laws of the Indian financial sector, had submitted its report to the then Finance Minister P Chidambaram in March 2013. It was headed by Justice B N Srikrishna and members included Rao, Y H Malegam, K J Udeshi, Jayanth Varma and P J Nayak.
Not a binding authority by any means, and something FinMin would obviously deflect any political criticism at. M Govinda Rao is a developmental economist, and not a government legislator at all. He's simply one of the members of the ad hoc FSLRC.