Reserve Bank governor Duvvuri Subbarao said on Friday that the central bank and the government needed to talk to each other – in careful words that spoke of policy coordination but steering clear of intervention that could undermine his autonomy.
Subbarao said the “complexity of the situation” —a reference to India trying to balance inflation control with credit to fuel growth amid a global financial crisis — demanded “unconventional, unorthodox and swift” policy actions.
He may have been trying to silence critics who say the RBI has become a government department, or trying to legitimise what some believe is warranted pressure by the government on the banking system.
With an eye on the flight of funds from emerging markets and uncertainties in currency management, the governor said the situation called for “unconventional, unorthodox and swift” policy actions.
“There is also need for close coordination between the government and the regulatory agencies without at the same time eroding institutional integrity and independence."