Budget Moves to curtail RBI Power? Experts Differ
Updated: Mar 02, 2015 04:57:43pm
The move to set up a separate PDMA is a bit drastic for reducing the powers of RBI as it comes with many pre-conditions. After all, RBI has been doing a fairly good job in the past on this front, especially during the East Asian currency crisis and also during the recent flight of capital following the Fed's tapering talk, - says an independent expert.
While presenting the Budget, Finance Minister Arun Jaitley mentioned about the recommendations of the Financial Sector Legislative Reforms Commission constituted by the UPA Government, under the chairmanship of retired Justice BN Srikrishna, on setting up the PDMA.
It can be noted that even though it was RBI Governor Raghuram Rajan who suggested the monetary policy committee, he was critical of some of the FSLRC recommendations. Terming FSLRC report calling for a unified financial regulator as "somewhat schizophrenic," Rajan had said "there is no discussion of the empirical magnitude of the synergies gained or synergies lost which makes the recommendations seem faddish and impressionistic rather than based on deep analysis.
However, Chief Economist of a leading public sector Bank said the proposed PDMA will help promote investment. On any move to shift public debt management from RBI to a debt management office, he said it is a globally accepted best practice as most OECD countries have already established dedicated debt management units. Also, emerging economies like Brazil, Argentina, Colombia and South Africa have restructured and consolidated debt management. (KNN/DB)