Lessons from India on political meddling in central banks
It is imperative that the mandate and the decisions of central banks are understood and respected. Their mandate is linked to a country's economic fortunes
Two BRICS member countries, India and South Africa, have recently experienced rather unedifying episodes related to the leadership of their central banks. Raghuram Rajan, the governor of the Reserve Bank of India, was recently harassed out of the job by politicians belonging to the ruling Bharatiya Janata Party (BJP) party. The South African Reserve Bank, which has remained free of noticeable political interference, is having to manage signs of unhappiness about its position from senior governing party politicians aligned to President Jacob Zuma. These incidents represent potentially grave threats to the independence of the countries' central banks and by extension the proper functioning and credibility of key state institutions and economic performance. There are still vigorous debates globally about central bank independence. I would argue that whatever the formal legal or constitutional prescriptions, it is imperative that the mandate and the decisions of a country’s central bank...
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