Reserve Bank of India (RBI) deputy governor Viral Acharya, in his speech on Friday, argued that the central bank needs to be independent to improve the macroeconomic stability, and policies need to be rule-based.
Reacting to Acharya's speech, Jahangir Aziz, head of EM economic research at JPMorgan, said, “If you do have the relationship between the central bank and the government of India come to a point where we have a strong adverse reactions, the market will react badly. I don’t think that is something specific to India, I think that is true for almost everywhere in the world."
“This is something that episodically arises in Indian context. So I don’t think that is something new or that hasn’t been discussed publically before,” he said, elaborating on his take on Acharya's speech.
According to him, how RBI perceives its interest rate policy in the coming quarter is 'probably more important than any of the decisions at this point in time'.
“The rhetoric may be different in the sense that you are talking about the central bank's independence much more centrally today than in the past but apart from talking about the central bank's independence as a core part of monetary policy - I don’t think it is that different than what had happened in the past," he added.