The government’s top economist criticised the Reserve Bank of India’s inflation math and its decision not to cut interest rates on Wednesday while the RBI governor Urjit Patel publicly asserted the central bank’s independence, laying bare the simmering tension between the two at a time of sluggish economic growth.
Patel set the cat among the pigeons early on Wednesday afternoon when he declared that all the officials of the monetary policy committee (MPC) had declined the finance ministry’s request for a meeting ahead of the policy meet on June 6 and 7.
“The meeting did not take place; all the MPC members declined the request of the finance ministry for that meeting,” Patel told reporters in a press conference after announcing his second bi-monthly policy. Media reports last week had suggested that the government had called for a meeting with members of the monetary policy committee (MPC) just ahead of the policy meet. The move was widely criticised as government attempts to meddle and influence RBI’s interest rate decisions.
Finance minister Arun Jaitley defended the government’s move to meet with or convey the government’s point of view to MPC officials. In an interview to Bloomberg, Jaitley said that the finance ministry represents the government of India and it is well within its rights to convey the government’s point of view whether orally or in writing. He said the government respects the RBI’s decision and any decision on interest rates is within the RBI’s jurisdiction.