Finance minister Arun Jaitley said that communication & dialogue were key for any democracy, and hoped for better relations with the RBI.
New Delhi: Finance minister Arun Jaitley said Friday that the autonomy of an institution cannot be synonymous with isolationism.
Referring to the recent spat between the government and the Reserve Bank of India (RBI), he said “manufacturing” domestic problems such as a self-inflicted credit crunch could hinder growth, and that flagging concerns pertaining to these with the central bank cannot be perceived as impinging on the institution’s autonomy.
“I can’t conceive how an elected government flagging the issue of credit and liquidity infringes on the autonomy of the central bank,” Jaitley said at the annual general meeting of FICCI. He said resolving the liquidity crunch must be taken up on priority to ensure a sustained high growth rate.
“Not addressing the liquidity situation now will create a challenge for the domestic economy. We have to get out of the syndrome of difficulties in credit, and improve liquidity in the market,” he said.
Hope for better relations
Underlining that communication and dialogue were key for any democracy, the finance minister added that he was hopeful of better relations with the RBI in the near future.
The government appointed former civil servant Shaktikanta Das as the RBI governor earlier this week, a day after Urjit Patel’s shock resignation.
Jaitley’s comments come a day after railways and coal minister Piyush Goyal, who was acting finance minister while Jaitley was recovering from surgery earlier this year, lashed out at the RBI under Patel, saying one could not have power “without being responsible”.
The Modi government has been insistent on easing lending norms and relaxing the prompt corrective action framework for banks. It has also been demanding a larger share from the RBI’s surplus. Patel, however, refused to give in to the government’s demands.
Also read: Piyush Goyal slams RBI under Urjit Patel — one cannot have power without being responsible
Eye on the polls
Jaitley also said it was critical to improve the quality of public discourse. As the Lok Sabha polls inch closer, the country is set to witness high-pitched political rhetoric, he added.
“I do believe that what is going to be said in the next five to six months will be important for the Indian economy… A lot of what is said and raised may not be an expression of real intention,” he said, but added that it could have long-lasting impact on the country’s political and economic contours.
Jaitley also said decisive leadership, along with clarity and stability of policy, was crucial for India’s economic progress. A fragile coalition government will not be able to provide the required direction and reforms to the country, which are the need of the hour for sustaining a high growth rate. Until something spectacular happens, it will be difficult to clock a growth rate above 7-8 per cent.
Jaitley also said fiscal deficit targets would be adhered to, amid speculation that the government may announce sops just ahead of the elections.