Govt, RBI should have dialogue to address problems affecting economy

M Venkaiah Naidu

In apparent reference to the recent spat between the government and the Reserve Bank, Vice President M Venkaiah Naidu Tuesday said there should be a regular dialogue between the two in the boardroom to arrive at solutions to address problems affecting economy. Referring to the issue of liquidity crunch, Naidu said the problem was because few "black sheep" who have taken the system for ride, affecting the entire industry.

"All of us have to introspect. Politicians... and the industry. A few people.. have taken the system for a ride and banks lent money left and right... "RBI was not doing things at that time and now they have tightened everything, so there are there are problems...," he said. Naidu said these problems have to analysed and understood. The Reserve Bank of India (RBI) and the government of India must have a regular continuous dialogue.

"There is no question of who is powerful or who is final. Final are the people and their interest. All these systems are created to facilitate people's welfare. "So they should have to have a dialogue within their boardroom rather than discussions through media and then come to some solutions addressing the actual problems," he said while addressing the diamond jubilee celebrations of the Confederation of Indian Textile Industry (CITI) here. Amid growing tensions with the central bank, the Finance Ministry had earlier sought discussions under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor.

RBI Deputy Governor Viral Acharya had in a speech last month talked about the independence of the central bank, arguing that any compromise could be "potentially catastrophic" for the economy. On November 19, the RBI board had held a marathon meeting amid a rift between the central bank and the government over several issues including how much capital the apex bank needs, lending norms for small and medium enterprises and rules for weak banks. Following the meeting, the RBI and the government agreed to refer to an expert committee the contentious issue of appropriate size of reserves that the RBI must hold, while restructuring of stressed loans of small businesses would be considered by the central bank.

Vice-President Naidu further said India was the most favoured destination for investment and global organisations like World Bank and World Economic Forum, which are of the view that if the country continues with its reform process, it will become the third-largest economy in the world. He also called upon the textiles industry, which contributes more than 3 per cent to the GDP, to adopt new innovative technology in line with the demands of 4th industrial revolution. Addressing the gathering, Textiles Minister Smriti Zubin Irani said the government was committed for the growth of the textile industry.

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