THE HINDU Editorial Vocabulary - October 9, 2018 - Time to talk

Time to talk: on Centre-RBI differences

The simmering tensions over the last few months between the Reserve Bank of India and the Centre found spectacular release over the weekend through a public speech by Deputy Governor Viral Acharya. “Governments that do not respect central bank independence,” said Mr. Acharya, “will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution.” These are very strong words and raise the question: why? This is not the first time that the RBI has had a run-in with the mandarins at North Block, and it will not be the last. 

India has had Finance Ministers who got frustrated enough to say that they would “walk alone” in driving the economy, and RBI Governors responding that the Centre would still be thankful that the central bank exists. Indeed, disagreements between Mint Street and North Block over setting benchmark interest rates have been common over the years. What is different this time, though, is that the disagreements, none of which are insurmountable, appear to be over regulation per se. There are three issues on which the Centre seems to have irked the RBI. It has refused to accept Governor Urjit Patel’s point that the RBI is hobbled by lack of adequate powers in regulating public sector banks. The second is the tussle over the RBI’s burgeoning reserves, a piece of which the Centre is eyeing to bridge its fiscal gap. The RBI resents this. The last is the attempt by the Centre to set up an independent payments regulator, which the RBI sees as encroachment of its turf.

For its part, the Centre has several grouses, the chief among them being over an RBI circular of February 12 which redefined NPAs and revised the framework for resolution. It is also upset that the central bank is not doing enough to ease the ongoing liquidity squeeze through extraordinary measures. These are issues that could be easily addressed by sitting around a table, but the fact that they haven’t done so points to a complete breakdown of communication between the RBI and the government, something that bankers have been privately acknowledging for some time now. A certain amount of creative tension is systemically in-built given their different perspectives: one is short-term and political; the other is long-term and technical. Such tension is good for the economy. Yet, that is no excuse to spar over turf or make statements aimed at pressuring the other side into acting in a particular manner. The current row is definitely worrying given the backdrop of economic turmoil, globally and domestically. The Centre and the central bank must talk behind closed doors and resolve their differences as mature entities, as they have done so many times in the past.

Vocabulary

Simmering: stay just below the boiling point while being heated.

Example: The goulash was simmering slowly on the stove

Synonyms: boil gently, cook gently, bubble, stew

Spectacular: beautiful in a dramatic and eye-catching way.

Example: Spectacular mountain scenery

Synonyms: striking, picturesque, breathtaking, arresting, glorious

Ignite: catch fire or cause to catch fire.

Example: Furniture can give off lethal fumes when it ignites

Synonyms: catch fire, burst into flames, combust, be set off, explode

Frustrate: prevent a plan or attempted action from progressing, succeeding, or being fulfilled.

Example: His attempt to frustrate the merger

Synonyms: thwart, defeat, foil, block, stop, counter, spoil, check, balk

Indeed: used to emphasize a statement or response confirming something already suggested.

Example: It was not expected to last long, and indeed it took less than three weeks

Synonyms: as expected, to be sure, in fact, in point of fact, as a matter of fact, in truth

Insurmountable: too great to be overcome.

Example: An insurmountable problem

Synonyms: insuperable, unconquerable, invincible, unassailable, overwhelming

Hobble: walk in an awkward way, typically because of pain from an injury.

Example: He was hobbling around on crutches

Synonyms: limp, walk with difficulty, walk lamely, move unsteadily, walk haltingly

Encroachment: intrusion on a person's territory, rights, etc..

Example: Minor encroachments on our individual liberties

Synonyms: intrusion on, trespass on, invasion of, infiltration of, incursion into, appropriation

Turmoil: a state of great disturbance, confusion, or uncertainty.

Example: The country was in turmoil

Synonyms: confusion, upheaval, turbulence, tumult, disorder, disturbance, agitation