RBI policy meeting: No rift with Reserve Bank of India, say senior government officials

NEW DELHI: The government and RBI have no “rift” over monetary policy, top government officials told ET, adding that the Centre and the central bank have “the best of relations”. That government-RBI relations were fine was exemplified, one official said, by a “cordial lunch between RBI governor Urjit Patel and senior government officials today (Friday)”.

The lunch was attended by additional principal secretary to the prime minister, PK Mishra, cabinet secretary PK Sinha and financial services secretary Anjuly Chib Duggal.

This was a pre-fixed lunch, officials said, and the date was decided when the same government officials had been hosted by RBI at its headquarters. At Friday’s lunch, government and RBI officials had “a good laugh” over media reports of a “rift”, one official said. These officials spoke off record.

Another official said views “expressed by advisers are not necessarily those of the government’s”.

Chief economic adviser (CEA) Arvind Subramanian had criticised RBI’s decision to not lower interest rates in its monetary policy this week.

“There is absolutely no rift between the government and the Reserve Bank. The CEA is not the government. He can give his advice which will be duly considered but his advice is not the government’s decision,” a top government official told ET.

ET’s email sent to the CEA remained unanswered till the time of going to press.

“There is no rift, each party (government and RBI) knows its turf and how far it can go. The government has been giving its feedback but once the feedback is given to RBI, the ultimate decision is RBI’s – that is why we have experts in the Monetary Policy Committee (MPC). Once an MPC is formulated, we have to go by its means and methods,” another top government official said.

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Officials also said Subramanian called a meeting with MPC members before the monetary policy review. “The CEA had no business to call them (MPC members).

That is why they did not go,” a top government official said.

Responding to RBI’s decision to not cut rates on Wednesday, Subramanian had criticised the central bank’s inflation estimates, saying headline and core inflation had declined sharply and the inflation outlook has been rendered benign by a rising currency, good monsoon and capping of oil price increases by structural shifts.