Arvind Subramaninan differs with Rajan on framing policies

Months after former RBI Governor Raghuram Rajan hung up his boots, Chief Economic Adviser Arvind Subramanian on Thursday said he always had differences with Rajan who advocated framing policies by keeping in mind other global factors.

“Countries made monetary policies for their own interest. We don't set monetary policy based on the impact of Bangladesh or Sri Lanka,” Subramanian told a private TV channel, adding, however, “we need coordination”.

Subramanian has been arguing for lower rates ever since he assumed charge as CEA. He had argued for the same even while Rajan was the RBI governor.

On Wednesday, the simmering tension between the government and the RBI Governor came out in open when Subramanian issued a long statement criticising the RBI’s decision.

In his statement, Subramanian argued that the outlook on inflation going forward was benign which contrasted the RBI’s forecast of an upside risk to inflation going forward.

Governor Urjit Patel in his monetary policy statement on the other hand had argued that the easing of inflation excluding food and fuel might be “transient” in view of its underlying stickiness in a situation of rising rural wage growth and strong consumption demand.


Boost growth

In the past,  Subramanian has not only differed with Rajan over the need to cut interest rates to boost growth but also argued against the RBI’s heavy reliance on consumer prices while setting monetary policy.

He had also advised RBI to be flexible and consider the fall in wholesale prices while reviewing interest rates on several occasions.