For the last one week or so, the news space has been filled with the RBI versus Centre debate. There have been several rumors floating around about the RBI Governor contemplating resignation from the position. Congress, as usual, has rushed to use this issue and started weaving its own ‘RBI’s autonomy in danger’ narrative. Both Congress President Rahul Gandhi and the former Finance Minister P Chidambaram who once took an indirect jibe against the RBI Governor over demonetization, are now suggesting that there is some kind of injustice happening with the Governor. This kind of hypocrisy is not new to the Congress as it considered HAL (Hindustan Aeronautics Limited) was not so good under their own administration, however, the party has now changed its viewpoint to the other extreme. The same is happening with the RBI issue at present.
It would be interesting to know that Congress when it was in power, had constantly undermined the autonomy of RBI. Recently, P Chidambaram has written an opinion piece arguing that the Centre is usurping the autonomy of RBI and Dr. Urjit Patel, RBI Governor has been rightly asserting his independence and the authority. Supporting the argument, Rahul Gandhi also tweeted saying that the RBI Governor is ‘finally defending the RBI’. All these are trying to portray that the difference of opinion between the Central Government and RBI has been happening for the very first time in the history of the country. However, the facts tell us the story of how Congress treated the RBI Governor with disrespect under its rule.
It Started with Nehru …
Rahul Gandhi who cites the example of the reported ongoing friction between RBI and the Centre to weave ‘institutions under attack’ narrative should know that his great-grandfather, the first Prime Minister of India had categorically stated that RBI could not have policies contradictory to the government. The then RBI Governor, Sir Benegal Rama Rau resigned from his position in 1957 when Nehru took sides of the then Finance Minister, TT Krishnamachari who had picked up a fight with the RBI Governor.
The then RBI Governor opined that the Finance Minister behaved rudely with him and also took exceptions to Nehru’s comment maintaining that the consultations over the Budget proposal were inadequate.
A report published in The Times of India documented this particular ordeal in detail.
P Chidambaram’s Disingenuous Record
Ideally, P Chidambaram should be the last person commenting on the RBI autonomy and the conflict between the government and RBI Governor, as his own term is dotted with the constant clashes with the institution.
In his tenure as the Finance Minister during UPA-1, P Chidambaram had a run up with the RBI Governor of that time, YV Reddy over the issue of opening up of banking ownership to the foreign banks. YV Reddy in his autobiography revealed that he contemplated resignation on differences with Chidambaram.
While during UPA-2, P Chidambaram’s differences with the RBI Governor of that time, DV Subbarao were severe. Suggesting that the government is not getting adequate support from the RBI, P Chidambaram once said that he would ‘walk alone’ to ensure growth in the face of tight money policy of the central bank. See how the DV Subbarao retorted this statement in one of his public speeches, where he said, “I do hope Finance Minister Chidambaram will one day say, ‘I am often frustrated by the Reserve Bank, so frustrated that I want to go for a walk, even if I have to walk alone. But thank God, the Reserve Bank exists”
In his book, ‘Who Moved My Interest Rate’ DV Subbarao recalled his friction with P Chidambaram and UPA government. A book review published in the Financial Express quoted the below point that underlines the friction RBI Governor had with the then government.
Today, P Chidambaram may argue that these are all just a difference of opinion which need not be interpreted otherwise. But then, what makes him and the Congress Party argue that the situation at present where the Government and the RBI are reportedly having different viewpoints is a never before happening?
The differences between the RBI Governor and the government are not a new happening in the history of our democracy. Even Manmohan Singh as the RBI Governor in 1982-85 wanted to quit over some differences with the then Finance Minister, Pranab Mukherjee. However, the Congress attitude in this regard is like ‘my dissent is creative and yours is attacking the RBI autonomy’! At this point, it should be noted that the Finance Ministry has already issued a statement saying that the autonomy of the RBI within the framework of the law is and will always be respected.