The government's shadow over the Reserve Bank of India just got bigger.
Appearing before the parliamentary standing committee yesterday, RBI governor Urjit Patel shied away from (or perhaps deliberately avoided?) answering most questions put forth to him.
The most gaping hole in his responses?
He did not know how much of the Rs 15.4 trillion of demonetised money has been returned to the banks. The banks are still counting, he says. Then, when asked when this number would be available to the public, he gave no definite answer.
Now, it is no secret that demonetisation has been hugely disruptive for all of India. And that's what makes this figure so critical. In all the debate over demonetisation, this one number alone would indicate whether the entire exercise was a success...or a failure.
It will show whether black money hoarders did indeed figure out how to get their stash back in the system with little or no costs. If the portion of 'black money' that was actually destroyed turns out to be negligible, it raises serious questions about the validity of the whole exercise to begin with.
But Urjit Patel dithered. He provided no answer. Perhaps his answers would have been inconvenient for the government...
Remember that, last month, after the RBI disclosed Rs 12.4 trillion of old currency had been returned by 10 December, the finance ministry disputed the figure, citing possible errors in accounting and calling for the data to be sanitised. The RBI hasn't released any fresh data since.
Many questions were already being been raised about the autonomy of the RBI. Yesterday's events will only make the questions louder. Indeed, the governor's tip-toeing around the questions increases fears of the government's overbearingness on the central bank's affairs - more so since demonetisation.
The healthy functioning of any economic system depends on its vital institutions doing their jobs well. The independence and autonomy of the RBI and its policies is a critical cog in the wheel of India's economic well-being. Any encroachment by the powers that be could compromise the whole system.
Appearing before the parliamentary standing committee yesterday, RBI governor Urjit Patel shied away from (or perhaps deliberately avoided?) answering most questions put forth to him.
The most gaping hole in his responses?
He did not know how much of the Rs 15.4 trillion of demonetised money has been returned to the banks. The banks are still counting, he says. Then, when asked when this number would be available to the public, he gave no definite answer.
Now, it is no secret that demonetisation has been hugely disruptive for all of India. And that's what makes this figure so critical. In all the debate over demonetisation, this one number alone would indicate whether the entire exercise was a success...or a failure.
It will show whether black money hoarders did indeed figure out how to get their stash back in the system with little or no costs. If the portion of 'black money' that was actually destroyed turns out to be negligible, it raises serious questions about the validity of the whole exercise to begin with.
But Urjit Patel dithered. He provided no answer. Perhaps his answers would have been inconvenient for the government...
Remember that, last month, after the RBI disclosed Rs 12.4 trillion of old currency had been returned by 10 December, the finance ministry disputed the figure, citing possible errors in accounting and calling for the data to be sanitised. The RBI hasn't released any fresh data since.
Many questions were already being been raised about the autonomy of the RBI. Yesterday's events will only make the questions louder. Indeed, the governor's tip-toeing around the questions increases fears of the government's overbearingness on the central bank's affairs - more so since demonetisation.
The healthy functioning of any economic system depends on its vital institutions doing their jobs well. The independence and autonomy of the RBI and its policies is a critical cog in the wheel of India's economic well-being. Any encroachment by the powers that be could compromise the whole system.
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