The investors have been anxiously waiting for the GST bill to come through which, unfortunately has been stuck due to the opposition creating a stumbling block. This budget mainly rests on nine pillars – agriculture, social programs, rural development, education (with a focus on skills development), infrastructure, financial reforms, policy reforms (with a focus on ease of doing business), fiscal discipline and tax reforms. These pillars are precariously balanced, leaning more towards the rural economy and with industry and sectoral reforms taking low priority. The key area of neglect is the banks – the real pillars of the economy and the key to its revival. The proposed support for their recapitalisation, at around 14% of the actual requirement, can hardly patch the gaping hole.
The measures to take away the RBI’s independence in framing monetary policies certainly leave a bad taste. Now, our stance on the RBI’s independence has always been very clear. The RBI deserves the credit for managing financial stability better than most other central banks globally. That too for decades! Successive RBI governors and their teams have ably steered the economy out of financial storms and crises. The key to the RBI’s success has been the independence given to the governor under the RBI Act, 1934. As a result, the RBI governors have never had to yield to political pressure on deciding interest rates. This is set to change with the RBI governor no longer having the veto on Monetary Policy decisions.
(The views expressed by the author in the article are his/her own.)