The Finance Ministry on Saturday hosted a farewell dinner in honour of outgoing Reserve Bank of India (RBI) Governor Raghuram Rajan.
The dinner was attended by Finance Minister Arun Jaitley and senior Finance Ministry officials.
Rajan's action packed three-year term came to an end on Sunday.
CENTRAL BANK INDEPENDENCE
In his last public speech before demitting office, Rajan on Saturday stressed the need to protect the ability of the central bank to say "no" to the highest echelons of government to protect macro economic stability.
"At the same time, the central bank cannot become free of all constraints, it has to work under a framework set by the Government," Rajan said in his speech at St. Stephens College in Delhi.
FUZZY STUFF
Rajan noted that RBI's role in macroeconomic stability is still fuzzy.
"While the RBI clearly is responsible for the safety and soundness of credit institutions and the stability of the external account, there are some areas that are hazier. For example, with an inflation focused framework, the RBI's ability to be accommadative depends on fiscal prudence from the Centre and states. How much should RBI warn on fiscal profligacy, including the building up of contingent liabilities, and when should such warning be seen as interfering with the legitimate decisions of the elected representatives of the people? This is an area where clarity would be useful," Rajan said.
Rajan also made a case for elevating the rank of RBI Governor, noting that central bank chief -- unlike government Secretaries or regulators -- has to occasionally disagree with the most powerful people in the country.
"It is dangerous to have a de facto powerful position with low de jure status", Rajan said.
The RBI Governor now has the salary of the Cabinet Secretary.
Rajan felt there may be some virtue in explicitly setting the Governor's rank commensurate with her position as the most important technocrat in charge of economic policy in the country.