Bengaluru: While expressing his reservation against targeting of inflation as an objective of monetary policy, former Union Minister Arun Shourie today said that he can not fault RBI Governor Raghuram Raajan for various "wrongs" , including keeping the interest rates high.
Shourie pointed out that it was Parliament which passed the Act saying that the object of monetary policy is control of inflation.
"I was against this targeting of inflation as an “objective of monetary policy. We are too diverse, too many things happen in India… that is the root of the problem, not Raghuram Rajan,” Shourie said.
“Everybody is saying he (Rajan) has kept the interest rates high, but what about the Parliament which passed the Act saying that the object of monetary policy is control of inflation; targeting of inflation. That’s the root cause of the problem,” he said during the Corporate Real Estate Conference organised by CoreNet Global here.
He said Rajan cannot be blamed because he was just performing his duty by using at least four to five instruments that were legislated in Parliament to fight inflation. “Now, interest rate, I agree is not the only instrumentfor fighting inflation, but if you tell a person your duty is to fight inflation and these are four or five instruments you have — cash deposit issues, interest rates so on and so forth– then he will use those instruments to perform his duty as you have legislated in Parliament,” he said.
Replying to a question, Shourie said he would be the last person to know about the government’s intent on Rajan’s extension. “Whether Rajan will stay or not, I would be the last person to know. But, as far his professionalism is concerned, I don’t think there has been any doubt on that at all,” he said.
Shourie said the real intent of the government would be known in the “type” of replacement to Rajan with someone else. Supposing in the eventuality that Rajan was replaced, “much will depend on the type of replacement you find – that will show the real intent. Do you find an independent robust man like Dr Y V Reddy or do you find another regulator,” Shourie said.
(With PTI inputs)