Central Bank and the Election Debacle

Central Bank and the Election Debacle

RBI and the government are two opposite forces who work to build the economy. They can be likened to developers and testers in a software team. Governments would typically love to spend and invest a lot to grow the economy, while the RBI would love to have the government spend less & maintain a low inflation as increased government spending contributes to more inflation. In short, the government is the accelerator and the Reserve Bank is the brake. Clearly a judicious mix of both is needed for the country.

The interventionist policies of the present government do not bode well for the Indian economy. Undermining the autonomy of the RBI can have disastrous long term consequences. However, as the resignation of Urijit Patel and before him Raghuram Rajan has shown the BJP government could not have cared less. Modinomics is driven by pragmatism as it seems to be inspired by results. The imbroglio that was Demonetisation, is a case in point. Chest thumping on some extraditions apart, it has done precious little for the common man. Thus, the only metric that can judge it will be its ‘ability to create jobs’. In this too, BJP has not fared well.

“You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time”. This is a quote attributed to Abraham Lincoln but the ruling party half a world away in India would do well to pay heed. Instead of boasting about physical endowments, condoning crime in the name of “gau Politics”, the head of a government should be concerned with governance. As evidenced by election results, the people have spoken.