Should RBI Governor have the veto power on the monetary policy?

Collective decision is the best way in a public enterprise

There has been heated debate post issuance of draft FLC frame work on RBI Governor's role on monetary policy decisions. Most believe that the Finance Ministry is working to shift the veto power from RBI Governor to the Finance Minister. This fear is valid when the majority in the committee are Government nominees, who are seen to act from the whip of the powers that be!

The democratic process in India do not support provision of veto power to any individual in the public domain. From this view point, it is good to go with the majority decision without overriding powers to any individual. The veto power is not available to the Heads of Central Banks in most countries. So, when India follows the foot steps of established developed economies in setting processes and good governance, why not in this as well? It is good that the RBI Governor endorses this view point.

Will the committee think and act independent?

The problem in India is always at the execution level. So, doubt arises on the extent of freedom available to the Government nominated members or others cleared by the Finance Ministry. The problem arises from the habit of echoing His/Her Master's Voice in order to retain the position, which brings to the forefront the personal interest over the public interest. Two options to clear this negative perception: The Finance Ministry to stay away from the Monetary Policy decision making giving complete freedom to the committee or appoint members who are seen to be independent, come what may without the desire to hold on to this coveted position if any decision is forced on them.

The strategy to move into democratic, collective and majority decision making process is great. But, it should reflect at the execution level to make it effective and efficient.

Is Arun Jaitley hearing?

Moses Harding