Do not drag RBI governor into unnecessary controversies: India Inc

The RBI governor should not be dragged into unnecessary controversies, a top industry organisation said here on Friday, stressing that the central bank has played a pivotal role in bringing about macroeconomic stability for India.

The Reserve Bank of India has played a pivotal role in making India the best among the emerging markets and unless some serious offence has been committed by an incumbent, he should not be targeted, the Associated Chambers of Commerce and Industry of India (Assocham) said.

"Surely, it is the prerogative of the government to appoint and re-appoint a person to the coveted position of RBI governor, but the kind of media statements being issued about Raghuram Rajan do not augur well for the country’s financial system,” Assocham said.

The Assocham statement comes in the wake of strong attack on RBI Governor Raghuram Rajan by BJP leader Subramanian Swamy, who in two letters to Prime Minister Narendra Modi in recent weeks has demanded that Rajan be removed from the post. On Thursday, Finance Minister Arun Jaitley slammed "personal attacks" on Rajan.

The country's financial system is already reeling under challenges because of the unprecedented levels of stressed assets in the banks, the chamber said.

“Rajan enjoys an impeccable track record as a top order world economist. The current account deficit has been brought down to a record level despite a huge fall in the merchandise exports, though a sharp drop in the import bill did help. As compared to currencies of the other emerging economies, the Indian rupee has performed exceedingly well,” the statement said.

“As far as monetary policy is concerned, to be fair to him, Rajan did drop the policy repo rates by about 150 basis points, which the banks have not transmitted fully,” it added.

"While one can argue about the inflation staying an obsession of the RBI, the central bank has been mandated by the targets of inflation set by an agreement set by the Finance Ministry. Besides, the RBI has been talking about sustainable growth trajectory, rather than infusing a bubble into an over-leveraged economy," the chamber said.

Urging restraint on the part of senior politicians, Assocham said that the matter of re-appointment of RBI governor should be left to the good wisdom and judgement of Prime Minister Narendra Modi.

“Certain amount of dignity must be attached to the post, especially when India is on the verge of a big leap into economic growth, after two years of dealing with global upheavals and domestic issues like successive droughts,” it said.