Wisdom arises out of disagreement, says Subbarao
Mumbai: Underscoring that RBI and the government are not adversaries, governor D Subbarao Monday said the disagreements are 'natural' and mechanisms need to be devised to work through the obvious differences.
"The government and RBI are not adversaries, we share a common goal. And I think some disagreement is natural," Subbarao said at the central bank's headquarters here after releasing a book containing unpublished essays by the late RBI governor IG Patel.
"There are disagreements within the government, there are disagreements between the government and regulators and the public policy institutions. In fact, I would worry if there is complete agreement," he said.
As a way forward, Subbarao said the two needs to devise mechanisms which could help to work through the obvious differences.
"Wisdom arises out of disagreement, but what we need is a mechanism for distilling wisdom out of this disagreement," said the RBI governor.
Reading an excerpt from the book "Of Economics, Policy and Development: An Intellectual Journey of IG Patel," Subbarao also spoke on the likely fallouts of stand-offs in case of disagreements.
"Don't knit-pick, pick your battles and once you pick your battle, fight it valiantly," he said, summarising the policy of the late Patel.
In case of a likely stand-off, the "ultimate defence" for the RBI governor to justify his actions "is democracy and the tradition of free debate," Subbarao said.
The book is edited by former RBI governor YV Reddy and ex-research director at the central bank Deena Khatkhate.
There has been reported divergence between the government and the RBI, which has been focusing mainly on controlling inflation.
Union ministers have been vocal about the need for a soft interest rate regime.
In its bid to rein in inflation, the Reserve Bank hiked key policy rates 13 times, totalling 350 basis points, between March 2010 and October 2011.
Besides, the RBI has called for the government to set its house in order and get fiscal deficit under control.
Subbarao also said in the last four years, RBI has raised some issues, including the independence of the central bank and the need for the government to set exemplary corporate governance standards, as it feels they need to be debated.
He said while discharging its duties, the central bank also needs to be sensitive and accountable.
"We are unelected...But we take decisions that affect the entire country. So, we must be very sensitive to rendering accountability for our actions and the results of those actions," he said.
In his speech, he also said he has doubts over the age-old model code followed by civil servants wherein they don the mantle of advising the decision-makers and then are expected to follow the decision taken by the political leaders, even if it went against their wishes.