Mumbai: RBI Deputy Governor Viral Acharya on Friday pitched for “effective independence” of RBI and said that governments that do not respect central bank’s independence would sooner or later incur the wrath of financial markets.
Differences between the government and the RBI have become apparent recently. Acharya said that undermining a central bank’s independence is akin to committing a “self-goal” for any government. He added that wiser politicians will give a central bank necessary autonomy so that they reap electoral benefits of stable macroeconomic conditions which such independence will bring.
The academic-turned-central banker Acharya expressed his views while delivering the over 85-minute long speech at A D Shroff Memorial Lecture. He expressed some satisfaction with the level of independence achieved by the RBI but underlined the need for more leeway.
Acharya dubbed the RBI as a “friend” of the government, which will “tell the government unpleasant but brutally honest truths and correct, to the extent it can, any adverse long-term consequences of government policies”.