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1) The recent tussle between the RBI and the government points out to the delicate balance RBI has to maintain in its functioning. Comment. (250 words)

Topic– Separation of powers between various organs dispute redressal mechanisms and institutions.

1) The recent tussle between the RBI and the government points out to the delicate balance RBI has to maintain in its functioning. Comment. (250 words)

The hindu

Why this question

The recent controversy surrounding the RBI and the central government revolves around sec 7 of the RBI act. However, interference in the functioning of the RBI will have a lot of repercussions for the economy as discussed by the article.

Directive word

Comment- here we have to express our knowledge and understanding of the issue and form an overall opinion thereupon.

Key demand of the question.

The question wants us to express our opinion on the need to maintain a fine balance RBI has to maintain in its functioning given the veto powers enjoyed by the government under sec 7 of RBI act.

Structure of the answer

Introduction– write a few introductory lines about the  recent controversy between the RBI and the central government.

Body-

  1. Discuss the provisions of sec 7 of the RBI act and how it empowers the central government vis a vis the functioning of the central government.
  2. Discuss why RBI has to maintain a fine balance in its functioning. E.g the RBI Act allows the government to give written directives to the RBI in the public interest. On critical issues, often the choice for the Governor is to concede to the government with or without a written directive; the RBI is autonomous but within the framework of the RBI Act; at the same time the RBI is responsible for the country’s monetary policy and inflation targeting; Ultimately, it is the elected representative ruling the country who is answerable to the citizen every five years. The representative cannot split hairs before the voter while explaining the economy’s performance — he has to own up for everything, including the RBI’s actions, as his own; The Governor has to be conscious of the limits to his autonomy at all times, and the government has to consider the advice coming from RBI in all seriousness etc.

Conclusion– based on your discussion, form a fair and a balanced conclusion on the given issue.