Collateral Damage

Economy is at the receiving end of the tussle between government and Reserve Bank

- Soumik Dey

VIRAL ACHARYA could not have found a better analogy to describe the difference between the government’s and the Reserve Bank’s approach towards the economy. The RBI deputy governor, delivering the A.D. ShroffMemorial Lecture in Mumbai on October 26, compared the government’s “myopic” economic policies to a T20 cricket match, in contrast to the RBI’s long-term planning, which he called a Test match. “This myopia or short-termism of governments is best summarised in history by Louis XV when he proclaimed ‘Apres moi, le deluge!’ (After me, the flood!),” he said.

Acharya dumped euphemism when he levelled his next charge, the government’s interference in the functioning of the RBI. “When governance of the Central bank is undermined, it is unlikely to attract or be able to retain the brightest minds that thrive on the ability to debate freely, think independently, and effect change; attrition of central bank powers results in attrition of its human capital and deterioration of its efficiency and expertise over time,” he said.