Arun Jaitley, India’s finance minister (left) and Raghuram Rajan, governor of the Reserve Bank of India, attend a meeting at the central bank’s headquarters in New Delhi. Jaitley said the
government and central bank are having ‘free and frank’ discussions, dismissing speculation of disputes.
Bloomberg/New Delhi
India’s Finance Minister Arun Jaitley said the government and central bank are having “free and frank” discussions, dismissing speculation of disputes as the Reserve Bank of India undergoes the biggest overhaul in its history.
“There is no question of any disconnect,” Jaitley said after a customary annual appearance before the bank’s board to explain steps proposed in last month’s budget.
Jaitley and Reserve Bank of India Governor Raghuram Rajan are in the midst of changes that will revamp the 80-year-old central bank. After agreeing on a formal inflation target this month, they’re in talks to finalise a structure for a rate-setting committee similar to the Federal Reserve Board or Bank of England, as well as formalize the government’s decision to separate debt and monetary management.
“All issues which concern both the institutions are regularly discussed,” Jaitley said at a joint press conference with Rajan in New Delhi.
From the year through March 2017 onward, the central bank will target inflation of 4%, plus or minus 2 percentage points. The government and central bank are wrangling over the structure of a Monetary Policy Committee that would replace the current rate-setting system once the RBI Act of 1934 is amended.
The Finance Ministry’s proposal calls for an eight-member committee headed by the Reserve Bank governor, which includes one government nominee with no voting rights, according to two officials with knowledge of the matter who asked not to be named because the discussions are private.
The central bank favours a five-member panel where the majority would determine policy decisions and the governor would act as tiebreaker only if a member was absent. The proposed committee would include the governor, his deputy and two outside experts picked by them, along with a Reserve Bank official handling monetary policy.
The damage has affected more than 5mn hectares in a nation where farming provides a livelihood for more than half its 1.25bn people, according to figures given by Agriculture Minister Radha Mohan Singh to the upper house on March 4.
“There is no direct one-to-one correlation between rains and prices,” Rajan said yesterday. “Sometimes it helps, sometimes it hurts. What it does mean is we have to be more careful on food management. It means greater vigilance.”
Rajan has lowered the benchmark repurchase rate twice in unscheduled decisions this year. Unlike last month, when he zeroed in on inflation and Jaitley’s February 28 fiscal budget, Rajan in his March 4 policy document cited nine data points that will affect further moves.
